ECON-101 Lecture 15: ECON 101 Lecture 15: Microeconomics: Organizing Production

46 views2 pages

chocolateshark861

10 Nov 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Accountants measure a firms profit in order to pay taxes and to show investors how money is used. Profit( ) = total revenue - total cost(explicit or money spent) Have to take into account depreciation as well. Economics measures a firms profit to make decisions and maximize economic profit. Economic profit = total revenue - total cost. Total cost = opportunity cost + monetary cost. Or, the total cost in this case is the implicit cost. Implicit cost = explicit cost + opportunity cost. From here on out, cost will be implicit costs and profit will be economic profits. The problem of devising compensation rules that induce an agent to act in the best interest of a principal. What to produce itself and what to buy from other firms. Occurs when a firm uses the least amount of inputs to produce a given output. Occurs when the firm produces a give output at the least cost.

Related Questions

5. Economic profit is equal to

a. total revenue minus the explicit cost of producing goods and services.

b. total revenue minus the opportunity cost of producing goods and services.

c. total revenue minus the accounting cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

6. Accounting profit is equal to

a. marginal revenue minus marginal cost.

b. total revenue minus the explicit cost of producing goods and services.

c. total revenue minus the opportunity cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

7. Economic profit

a. will never exceed the accounting profit.

b. is most often equal to accounting profit

c. is always at least as large as accounting profit.

d. is a less complete measure of profitability than accounting profit

8. Which of the following expressions is correct?

a. accounting profit = total revenue - explicit costs

b. economic profit = total revenue - implicit costs

c. economic profit = total revenue - explicit costs

d. Both a and b are correct

Scenario 13-2:

Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3% interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50. Also during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000.

9. Zach's accounting profit for the year was

10. Zach's economic profit for the year was

Scenario 14-1:

As part of an estate settlement, Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per

11. At the end of the first year of operating her new business, Mary's accountant reported an accounting profit of $150,000. What was Mary's economic profit?

Marginal Cost, Revenue, and Pure Competition Assignment Worksheet
Directions
This assignment deals with the recognition and application of pure competition cost and revenue information that is graphically presented. Use the graph below to answer the following questions.
Microeconomic Problem

1. How do you know that the firm represented in the graph above is a purely competitive firm?

2. To maximize profits, this firm will produce at what output level(one letter)?

3. Explain why this MR=MC position is the profit-maximizing position for any firm.

4. What is the product price (one letter)?

5. What is this firm's average revenue (one letter)?

6. At profit-maximizing output, what is this firm's average variable cost (one letter)?

7. At profit-maximizing output, what four letters indicate:

Total revenue? (Remember, four letters' a rectangle.)

Total cost?

Total variable cost?

Total fixed cost?

Total economic profit?

8. If price falls below what point, this firm will not operate in the short run? (No letter needed, just an explanation.)

9. What will happen to this firm's price, output, and economic profit in the long run? Why?

10. Where will the price settle in the long run? Remember, all purely competitive firms are theoretically doomed to make an only normal profit in the long run. (Again, no letter answer, just an explanation.)

11. Why is the long-run equilibrium position of a purely competitive firm productively and allocatively efficient?

teallizard995

The following questions address some of the price and output decisions faced by firms other than those found in perfect competition. Some numbers may be rounded.

Table 1

Output	Average Fixed cost	Average Variable Cost	Average Total Cost	Marginal Cost	Price	Total Revenue	Marginal Revenue
0					$ 345.00
1	$ 180.00	$ 135.00	$ 315.00		$ 300.00
2	$ 90.00	$ 127.50	$ 217.50		$ 249.00
3	$ 60.00	$ 120.00	$ 180.00		$ 213.00
4	$ 45.00	$ 112.50	$ 157.50		$ 189.00
5	$ 36.00	$ 111.00	$ 147.00		$ 165.00
6	$ 30.00	$ 112.50	$ 142.50		$ 144.00
7	$ 25.71	$ 115.70	$ 141.41		$ 126.00
8	$ 22.50	$ 121.90	$ 144.40		$ 111.00
9	$ 20.00	$ 130.00	$ 150.00		$ 99.00
10	$ 18.00	$ 139.50	$ 157.50		$ 87.00

Questions:

Complete Table 1. Summarize your calculations and use Microsoft Excel.
Using Excel, draw one graph showing average fixed costs, average variable costs, average total costs, marginal revenue, and marginal costs.
Using the data in the table and on your graph, what is the profit maximizing, or loss minimizing level of output? Explain and justify your answers.
What is a normal profit? What is an economic profit? Explain your answer using examples. Are normal profits being earned in this example? Are economic profits present for this firm in this example? Explain your answers.
Given the data in the table and the graph, how could you determine or identify the optimal plant size?
What is the difference between explicit and implicit cost? Explain your answers.
How would we determine if a cost is a fixed cost or a variable cost?

Present your analysis in Microsoft Excel format. Enter non-numerical responses in the same worksheet using textboxes. If you want to learn how to use Microsoft Excel to create curves, refer to the Microsoft Excel tutorials.

sangriacattle825

ECON-101 Lecture 15: ECON 101 Lecture 15: Microeconomics: Organizing Production

Document Summary

Get access

Related Documents

ECON-101 Lecture Notes - Lecture 1: Technological Change, Opportunity Cost, Carbon Footprint

ECON 101- Midterm Exam Guide - Comprehensive Notes for the exam ( 27 pages long!)

ECON102 Chapter Notes - Chapter 10: Historical Cost, Management, Sole Proprietorship

Related Questions