Exam 8: Short-Run Costs and Output Decisions

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof Earrings TVC MC AVC TFC TC AFC ATC 0 100 1 50 2 95 3 46.67 4 300 5 270 -Refer to Table 8.2. If Sherry produces three pairs of earrings, her total variable costs are

Average variable cost and average total costs get closer together as output increases because

ATC is

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. The average total costs are minimized when ________ ovens are produced.

Free entry implies that

The best combination of inputs at one level of production may not be best at other levels.

Refer to the information provided in Table 8.1 below to answer the questions that follow. Table 8.1 Produce Using Techniques Units of Variable K Inputs L 1 unit of output A 8 8 B 4 12 2 units of output A 14 12 B 8 20 3 units of output A 16 12 B 12 22 -Refer to Table 8.1. Assume the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and that firms attempt to minimize costs. The total variable cost of producing one unit of output is

Short-run costs that depend on the level of output are

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6 -Refer to Figure 8.6. The vertical distance AB is Outdoor Equipment's

In the short run where total variable cost is ________ at a(n) ________ rate, marginal cost is positive and decreasing.

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. If the market price of soybeans falls to $8, then to maximize profits this farmer should produce

If there is an increase in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning positive profits will see its profits ________.

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof Earrings TVC MC AVC TFC TC AFC ATC 0 100 1 50 2 95 3 46.67 4 300 5 270 -Refer to Table 8.2. Assume that Sherry's Earrings is producing in a perfectly competitive market and the market price for earrings is $60. To maximize profits Sherry should produce ________ pairs of earrings.

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. Up to Point A,

Marginal revenue (MR) is

A firm in a perfectly competitive industry is producing 50 units, its profit-maximizing quantity. Industry price is $2, total fixed costs are $25, and total variable costs are $40. The firm's economic profit is

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. The marginal cost is equal to average variable cost when ________ ovens are produced.

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing ________ bushels of soybeans, and his profit will be ________.

Related to the Economics in Practice on page 179: A college has an annual operating budget of $120 million. It educates and houses 1,500 students, for an average cost of $80,000 per student per year. Revenues per student from tuition, room, and board are considerably less than $80,000. Which of the following, if true, would strengthen the claim that increasing the number of students educated per year will result in a net financial gain for the college?

Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds this firm's marginal cost. It follows that producing one more computer will cause this firm's