ECON 4720 : 2nd Midterm Answer Key Spring 11

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azuremammoth471

15 Mar 2019

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Atc = (600 +40q)/q = 600/q + 40. A firm has a fixed production cost of and a constant marginal cost of production of per unit produced. Provide algebraic expressions for the firm"s 1) total cost, 2) variable cost, 3) average total cost, 4) average variable cost, and 5) average fixed cost. Note: this problem is similar to a problem that was included in the 4th problem set (chapter 7 exercise 3a, p. 261), especially when you consider the additional information that was provided in the answer key: (12 pt. ) Suppose the economy takes a downturn, and as a consequence, wage falls by 50 percent and is expected to stay at that low level for a long time. Show graphically how this change in the relative price of labor and capital affects a) the solution to the firm"s cost minimization problem, and b) the firm"s expansion path.

Related Questions

QUESTION 17

[Table 2] This firm will maximize its profit if it produces at the point when:

	a.	Profit is maximized.
	b.	Total revenue is maximized.
	c.	Total Cost is minimized.
	d.	All of the above
	e.	None of the above

4 points

QUESTION 18

[Table 2] This firm will maximize its profit if it produces at the point when:

	a.	Profit is maximized.
	b.	Marginal cost is equal to marginal revenue
	c.	Firm cannot be better off by producing more or less quantity
	d.	A quantity of 13 units
	e.	All of the above

4 points

QUESTION 19

[Table 2] This firm will maximize its profit if it produces the following quantity:

Table 2

-1	-2	-3	-4	-5	-6	-7
	Quantity Sold	Marginal Revenue	Marginal	Total	Total	Profit
Price	Quantity Sold	Marginal Revenue	Cost	Cost	Revenue
$10	10			80	$100	$20
$10	11	(A)	8	88	$110	$22
$10	12	(B)	(E)	97	(G)	(I)
$10	13	(C)	(F)	107	(H)	(J)
$10	14	(D)	11	118	$140	$22

	a.	$9
	b.	$10
	c.	$11
	d.	$13
	e.	$14

4 points

QUESTION 20

[Table 2] If price increases from $10 to $11, this firm will maximize its profit if it produces the following quantity:

Table 2

-1	-2	-3	-4	-5	-6	-7
	Quantity Sold	Marginal Revenue	Marginal	Total	Total	Profit
Price	Quantity Sold	Marginal Revenue	Cost	Cost	Revenue
$10	10			80	$100	$20
$10	11	(A)	8	88	$110	$22
$10	12	(B)	(E)	97	(G)	(I)
$10	13	(C)	(F)	107	(H)	(J)
$10	14	(D)	11	118	$140	$22

	a.	$9
	b.	$10
	c.	$11
	d.	$12
	e.	$14

4 points

QUESTION 21

A perfectly competitive firm should increase its level of production as long as

	a.	total revenue is less than total cost.
	b.	the total revenue curve is rising.
	c.	marginal revenue is greater than marginal cost.
	d.	the marginal revenue curve is rising.

silverbeaver496

12. If this firm faces a price of $38, the number of units it will produce per day in the short run is: A) 4 B) 5 C) 6 D) 7 E) 8 19 MC=42+2 G) 10 H) 11 1) 12 J) none of the above 38- 49,+2 9- 13. This firm's shut down price is: B) $8 C) $10 D) $11 E) $12 H) $15I ) $16 J) none of the above AVC= 2 F) $13 AVC=29 +2+1

On the following table of weekly operations, what quantity of workers should the firm hire to maximize profits if the weekly wage for these workers is $510?

Labor Output Price (of output)

15 200 $10

16 300 $9

17 400 $8

18 475 $7

19 525 $6

a. 15

b. 16

c. 17

d. 18

e. 19

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ECON 4720 : 2nd Midterm Answer Key Spring 11

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