Exam 9: Long-Run Costs and Output Decisions

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 $17, then in the short run the firm will

On the downward sloping portion of a firm's long-run average cost curve, it is experiencing

Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7 -Refer to Figure 9.7. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat, and individual profit maximizing firms will produce ________ bushels of wheat.

As long as economic profits are being earned in an industry, firms will ________ the industry and the supply curve will shift to the ________.

A firm that is earning positive profits in the short run has an incentive to ________ its scale of operation in the long run.

Refer to the information provided in Figure 9.2 below to answer the questions that follow. Figure 9.2 -Refer to Figure 9.2. This firm will continue to operate in the short run, but incur an economic loss if price is

Which of the following will shift the short-run industry supply curve of a perfectly competitive industry?

In the short run, firms suffering losses should always shut down.

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 Shop's total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to

Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7 -Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat, and individual profit maximizing firms will produce ________ bushels of wheat.

Which of the following is an example of economies of scale?

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. The market price is $42 and this firm is producing four units of output. Which of the following would you recommend to this firm?

Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7 -Refer to Figure 9.7. In which of the following price ranges will the firm continue to operate but at a loss?

Refer to Scenario 9.4 below to answer the questions that follow. SCENARIO 9.4: Sponsors invest $100,000 in a new deli on the promise that they will earn a return of 10% per year on their investment. The deli sells 52,000 sandwiches per year. The deli's fixed costs include the return to investors and $42,000 in other fixed costs. Variable costs consist of wages ($1,000 per week) plus materials, electricity, etc. ($2,000 per week). The deli is open 52 weeks per year. -Refer to Scenario 9.4. What must the average price per sandwich be for the deli to earn a normal return?

A firm's long-run average cost curve represents the minimum cost of producing each level of output when the scale of production can be adjusted.

An industry with a positive sloping long-run supply curve is called a(n) ________ industry.

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. The shutdown point for this firm is a price of

Which of the following is an example of diseconomies of scale?

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 D3, then a profit maximizing firm will produce ________ units and earn ________.

Economic profit is