Dropbox 3.4 - Donna Rezsonya ECO-310 3.4 Questions...

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Donna Rezsonya ECO-310 3.4 Questions & Problems/Applications
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Chapter 12 Questions and Review-questions 1 and 8 1. What is the relationship between a firm’s total revenue, profit, and total cost? The relationship between a firm's total revenue, profit, and total cost is profit equals total revenue minus total costs. 8. Define economies of scale and explain why they might arise. Define diseconomies of scale and explain why they might arise. Economies of scale exist when long-run average total cost falls as the quantity of output increases, which occurs because of specialization among workers. Diseconomies of scale exist when long-run average total cost rises as the quantity of output increases, which occurs because of coordination problems inherent in a large organization. Problems and Applications-problem 2 2. Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. A. Opportunity cost is when something must be given up to obtain an item. B. The opportunity cost of running the hardware store is $550,000, consisting of $500,000 to rent
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