ECON 1B03 Chapter Notes - Chapter 13: Average Variable Cost, Marginal Cost, Marginal Product

17 views2 pages

ochremarten860

29 Jul 2016

School

Department

Course

Professor

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

Shanghaibalcony1234 and 37744 others unlocked

ECON 1B03 Full Course Notes

Verified Note

46 documents

Document Summary

From the production function to the total-cost curve. The total product (tp) and total cost (tc) curves are inverses of each other. Marginal cost (mc): the change in total cost that arises from an extra unit of production; measures the rate of change in total costs as total product changes. Cost curves and their shapes: the costs of production. Costs as opportunity costs explicit costs: input costs that require an outlay of money by the firm implicit costs: input costs that do not require an outlay of money by the firm; time, other options. The cost of capital for firms could be considered an opportunity cost or an investment. The production function production function: the relationship between quantity of inputs used to make a good and the quantity of output of that good. Marginal product: the increasing rate of change in output that arises from an additional unit of input.

Related Questions

Q1. Average total cost is equal to
a. AFC + AVC
b. AFC/total output
c. AFC/AVC
d. AVC/AFC

Q2. As output increases, the ATC
a. increases
b. decreases
c. remains constant
d. falls and then rises

Q3. Total profit is equal to
a. total revenue minus total cost
b. total revenue minus explicit cost
c. total revenue minus variable cost
d. total revenue minus marginal cost

Q4. Marginal cost crosses the
a. AVC curve at the highest point of the AVC curve
b. ATC curve at the lowest point of the ATC curve
c. AFC curve at the lowest point of the AFC curve
d. ATC curve at the highest point of the ATC curve

Q5. Wages paid are an example of an explicit cost of doing business.
a. true
b. false

Q6. Any revenue over and above total cost is labeled economic profit.
a. true
b. false

Q7. If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be
a. $5,000
b. $8,000
c. $10,000
d. $20,000

Q8. Whenever marginal revenue exceeds marginal cost,
a. profit declines if output increases
b. profit increases if output increases
c. losses increase if output increases
d. marginal revenue must be rising

Q9. Under perfectly competitive conditions, marginal revenue is
a. greater than average revenue
b. equal to average revenue
c. less than average revenue
d. equal to the average variable

Q10. A firm's break-even point occurs where
a. marginal revenue equals marginal cost
b. marginal revenue equals average variable cost
c. total revenue equals total cost
d. total revenue equals total variable cost

Q11. The addition to total output resulting from using one more unit of a productive resource is the
a. average product
b. marginal input
c. total product
d. marginal product

Q12. Unlike a firm in pure competition, a monopolist may be able to
a. block the entry of new firms into the industry
b. continue to earn economic profits in the long run
c. earn economic profits in the short run
d. both (a) and (b)

Q13. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false

Q14. In the long run, under conditions of perfect competition, market forces come into play to
a. enhance profits
b. increase demand
c. eliminate profits
d. separate MR and AR

Q15. Consumer surplus is the area above the demand curve and below the equilibrium price.
a. true
b. false

Q16. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false

Q17. The more that firms advertise, the closer they get to perfect competition.
a. true
b. false

Q18. Perfect competition assumes that a producer is interested in maximizing profit.
a. true
b. false

Q19. In the long run, under conditions of perfect competition, the buyer will eventually be able to buy the product at a
a. price equal to the lowest point on the ATC curve past the optimal scale of operation
b. price below cost
c. price equal to the lowest point on the ATC curve at the optimal scale of operation
d. discount

Q20. The lowest possible ATC curve is attained at the optimal scale of output.
a. true
b. false

Given following Price and Total Cost functions:

P = 120 - 7Q

TC = 40 + 70Q - 10Q² + 0.6Q³

Where P = price, and Q is output.

Fill in the table below and answer the questions below the table.

Q	P	FC	TVC	TC	TR	Profit
0
1
2
3
4
5
6
7
8
9
10

If your company's goal is to maximize profit, answer the following questions below:

What price will you charge for your product?

What quantity will you produce?

And what would be your maximum profit or minimum loss at the price and output you chose?

2. If your company's goal is to maximize total revenue, answer the following questions below:

What price will you charge for your product?

What quantity will you produce?

And what would be your maximum total revenue at the price and output you chose? (3 points)

Question 3

Given a firm with the following cost data, fill in the table below.

Q = OUTPUT TFC = Total Fixed Cost AVC = Average Variable Cost ATC = Average Total Cost TVC = Total Variable Cost MC = Marginal Cost TC = Total Cost

Q	FC	TVC	TC	AVC	ATC	MC
0				---	---	---
1						10
2
3				10		10
4

yellowsea-lion638

A firm faces the following costs: total cost of capital = $1500; price paid for labor = $14 per labor unit; and price paid for raw materials = $5 per raw-material unit.

a. Suppose the firm can produce 5500 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5500 units of output?

Instructions: Round your answers to two decimal places.

TC = $
ATC = $

b. Now assume the firm improves its production process so that it can produce 6250 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 6250 units of output?

Instructions: Round your answers to two decimal places.

TC = $
ATC = $

c. If units of output can always be sold for $1 each, then by how much does the firm

ECON 1B03 Chapter Notes - Chapter 13: Average Variable Cost, Marginal Cost, Marginal Product

ECON 1B03 Full Course Notes

Document Summary

Get access

Related Documents

ECON 1B03 Lecture Notes - Lecture 7: Marginal Product, Profit (Economics), Fixed Cost

ECON 1B03 Chapter Notes - Chapter 6-14: Perfect Competition, Takers, Market Power

ECON 1B03 Lecture Notes - Lecture 6: Average Variable Cost, Fixed Cost

Related Questions