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- Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?In choosing a production technology, how will firms react if one input becomes relatively more expensive?
- How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?How does fixed cost affect marginal cost? Why is this relationship important?
- Are fixed costs also sunk costs? Explain.What is the difference between accounting profit and economic prof? A Economic profit subtracts both explicit and implicit costs from total revenue, while acounting profit only subtracts explicit costs. OR Accounting proft only subtracts implicit costs from totsi revenue, while economic profit only subtracts explicit costs. OC Economic proft orly subtracts implicit costs from total revenue, while accounting profit only subtracts explicit costs. OD. Accounting proft suberacts both explicit and implicit costs from total revenue, while economic proft only subtracts explicit costsCost SRATC, واج The crpés 1,2, and 3 for the SRATC on refer to different plant sares LRAC SRATC, SRATC₂ 9 a OA The fimm cannot produce at point C because there is no SRATC curve through this point OB. The tem may choose to remain at point B until the price of its output increases enough to justify building a new plant OC. If the firm continues to produce at point B for any period of time & must be because it is not proft-maximizing OD. If this em continues to produce at point B for any period of time it must be because it is not cost-minimizing OE There can be a significant time delay while the fim readjusts to plant size, during which time remains at point B
- SI. Which oy the fallowing Atatementy is /are TRUE Comarning average Fixed Cost (AFC)? A. AFC contimues to dedime as more outputs are produced but will never reach zero B. AFC continues to fall as more outputo are produced but is asymp totic to the harizantal axis (the output axia). C. Only A is carrect. D. Both A and B are carrect.AaBbCcl AaBbCcl AaBbC Aa T Normal T No Spac. Heading 1 Paragraph ..|. ..3 ..| . 4 | I S Tatal Cost Areroge Flved Cost Avernge Total Fed Cast Marginal Cost Tatal Averoge Varlable Cost Tatal Product Varlable Total Cast Cost 60 45 60 105 145 42.50 35 150 5. 190 50 295 Use the definitions for TFC, TVC, TC, AFC, AVC, ATC and SMC along with the data provided above to fill in the missing values. Use space below for worksheet. o means infinitely large. Applicable relationships are: SAC = AFC + AVC %3D %3D STC TFC TVC ATVC ATC SMC = 4Q AQ Cost puzzie 3docx 5-21. In some ordering problems, like the one for Sam’sBookstore, whenever demand exceeds existing inventory, the excess demand is not lost but is filled byexpedited orders—at a premium cost to the company.Change Sam’s model to reflect this behavior. Assumethat the unit cost of expediting is $40, well above thehighest regular unit cost.
