Exam 9: Long-Run Costs and Output Decisions

Related to the Economics in Practice on page 197. In a world economy in which trade occurs across geographical boundaries, if economies of scale exist,

Refer to Scenario 9.3 below to answer the questions that follow. SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal. -Refer to Scenario 9.3. Total cost per week is

Engineers for The All-Terrain Bike Company have determined that a 15% increase in all inputs will cause a 15% increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.

Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7 -Refer to Figure 9.7. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________.

Refer to Scenario 9.3 below to answer the questions that follow. SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal. -Refer to Scenario 9.3. Total variable costs per week are

Billy Bob's Fertilizer Engineers, a perfectly competitive firm, is incurring a loss, but the price is still above minimum average variable cost. Then in the short run this firm should ________, and in the long run, if there is no change in economic conditions, this firm should ________.

Refer to the data provided in Table 9.1 below to answer the questions that follow. Table 9.1 q TFC TVC TC MC AVC ATC 0 \ 50 \ 0 \ 50 -- -- -- 1 50 20 70 20 20 70 2 50 30 80 10 15 40 3 50 45 95 15 15 31.67 4 50 62 112 17 15.50 28 5 50 90 140 28 18 28 6 50 132 182 42 22 30.33 7 50 186 236 54 26.57 33.71 -Refer to Table 9.1. If the market price is $15, this firm should produce ________ units of output to maximize profits.

If TR > TC, a firm would ________ in the short run and ________ in the long run.

Refer to Scenario 9.5 below to answer the questions that follow. SCENARIO 9.5: Investors put up $52,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. -Refer to Scenario 9.5. In the short run, if the restaurant shuts down, its losses will equal its ________ costs of ________.

The shutdown point for a perfectly competitive firm is the

A firm can minimize its losses by shutting down when ________ are less than ________ costs.

If TR < TC, a firm would ________ in the short run and ________ in the long run.

Refer to the information provided in Figure 9.6 below to answer the questions that follow. Figure 9.6 -Refer to Figure 9.6. The type of industry depicted in this situation is

Refer to Scenario 9.5 below to answer the questions that follow. SCENARIO 9.5: Investors put up $52,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. -Refer to Scenario 9.5. Weekly total revenue is

A firm will choose to operate rather than shut down as long as

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The market price is less than its average variable cost. You should advise the firm to

Refer to the data provided in Table 9.2 below to answer the questions that follow. Table 9.2 q TFC TVC TC MC AVC ATC 0 \ 50 \ 0 \ 50 -- -- -- 1 50 20 70 20 20 70 2 50 30 80 10 15 40 3 50 45 95 15 15 31.67 4 50 62 112 17 15.50 28 5 50 90 140 28 18 28 6 50 132 182 42 22 30.33 7 50 186 236 54 26.57 33.71 -Refer to Table 9.2. If the market price is $20, then to maximize profits this firm should produce

Refer to Scenario 9.3 below to answer the questions that follow. SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal. -Refer to Scenario 9.3. The normal return to the investors on a weekly basis is

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. If this farmer is maximizing profit, his profit (or loss) is

If the price of an input decreases, each individual firmʹs marginal cost curve shifts ________ and the industry supply curve ________.