AREC 202 Lecture Notes - Lecture 4: Sunk Costs, Mira-Bhayandar Municipal Corporation, Marginal Cost

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chocolatesheep405

1 Sep 2016

School

CSU

Department

Agriculture + Resrce Econ

Course

AREC 202

Professor

Stephan Kroll

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Document Summary

Thursday, september 1, 2016 week 2 day 2. Arec 202 chapter 9 cont. and chapter 2. Marginal cost: the marginal cost of producing a good or service is the additional cost incurred by producing one or more unit of that good or service, constant ad increasing marginal cost. Constant marginal cost: each additional unit cost the same to produce as the previous one (as in. Increasing marginal costs: each unit of a good costs more to produce than the previous one (more common; low-hanging fruits ) If there is no quantity at which mb=mc, the choose the largest quantity at which. Sunk cost: sunk cost: a cost that has already been incurred and is non-recoverable. A sunk cost should be ignored in decisions about future actions. Trade-offs: the production possibility frontier: the production possibility frontier (ppf): maximum quantity of one good that can be produced for any given production of the other.

Related Questions

1. the marginal cost curve is

A. Downward sloping to reflect the bowed out PPF.

B. Downward sloping as marginal benefits increase.

C. Upward sloping because marginal cost falls as more of a good or service is produced.

D. Upward sloping to reflect the increasing opportunity cost of producing one more unit.

E. U-shaped to reflect the bowed out PPF.

2. Allocative efficiency occurs

A. Anywhere inside or on the production possibilities frontier.

B. When the total cost of production is minimized

C. At all points on the production possibilities frontier.

D. At only one point on the production possibilities frontier.

E. At the points where the production possibilities frontier crosses the horizontal or vertical axis.

3. Auditors working for a large accounting firm are often away from the office. When they are in the office, they are allowed to use any desk that is available. Which method is used to allocate desks?

A. lottery

B. first-come, first-served

C. Command

D. Contest

E. Sharing equally

4. The marginal cost of a good or service

A. Can be calculated from the marginal benefit of that good or service.

B. decreases as more of the good or service is produced.

C. Can be derived from the production possibilities frontier.

D. Graphs as a positively sloped curve, so it cannot be derived from the production possibilities frontier, which is downward sloping.

E. None of the above answers is correct.

5. The maximum amount of other goods and services that people are willing to give up in order to get one more unit of a good is defined as the good's

A. Marginal benefit.

B. Total benefit.

C. Marginal cost

D. Total cost.

E. Price.

Suppose that you can sell as much of a product (in integer units) as you like at $60 per unit. Your marginal cost (MC) for producing the qth unit is given by:

MC=7qMC=7q

This means that each unit costs more to produce than the previous one (e.g., the first unit costs 7*1, the second unit (by itself) costs 7*2, etc.).

If fixed costs are $100, what is the profit at the optimal output level?

Please specify your answer as an integer.

Match the following.

constant-cost industry	A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry	The demand facing a price-taking firm.
long-run equilibrium	A firm produces zero output but must still pay its fixed costs.
marginal revenue product	Price below which a firm shuts down in the short run.
perfect competition	All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand	Industry in which input prices rise as all firms in the industry expand output.
shut down	Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price	The additional revenue earned by hiring one more unit of a variable input.

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AREC 202 Lecture Notes - Lecture 4: Sunk Costs, Mira-Bhayandar Municipal Corporation, Marginal Cost

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