hw. ch 9 1-11 - ECON 203 Microeconomics TA Ergin Bayrak...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 203 Microeconomics TA: Ergin Bayrak November 3, 2005 Chapter 9 Homework #1-11 1. Implicit Costs: the opportunity costs of using a firm’s self-owned, self-employed resources. Example foregone interest, foregone rent, foregone wages, foregone entrepreneurial income. Explicit Costs: the monetary payments a firm makes to those who supply labor services, materials, fuel, transportation services, and the like. Example cost of t-shirt material, clerk’s salary, utilities. Explicit costs of attending college: tuition, fees, books, transportation. Implicit costs of attending college: foregone earnings (if decided to get a job), foregone interest. Normal profit is a cost of doing business. The payment you could receive for performing entrepreneurial functions is an implicit cost. Economic profit is not a cost; it is a return in excess of the normal profit that is required to retain the entrepreneur in this particular line of production. If the economic profit is zero, then the entrepreneur is still covering all implicit and explicit costs. 2. Accounting profit: Total sales revenue: 72,000 Clerk’s salary: 12,000 Materials: 20,000 Rent: 5,000 Total Explicit Costs: 37,000 Accounting Profit: 35,000 Economic Profit: Accounting Profit: 35,000 Foregone interest: 4,000 Foregone wages: 15,000 Foregone entrepreneurial income: 3,000 Foregone rent: 5,000 Total implicit costs: 27,000 Economic Profit: 8,000 3. Long-run or short-run adjustments? a. Wendy’s builds a new restaurant long-run b. Acme Steel Corporation hires 200 more production workers short-run c. A farmer increases the amount of fertilizer used on his corn crop short-run d. An Alcoa aluminum plant adds a third shift of workers short-run 4. Inputs of Labor Total Product Marginal Product Average Product 0 0 -- -- 1 15 15 15 2 34 19 17 3 51 17 17
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
4 65 14 16.25 5 74 9 14.8 6 80 6 13.33 7 83 3 11.86 8 82 -1 10.25 Graphs: MP rises first, declines, and then ultimately becomes negative because MP is the slope of TP. So when TP is increasing, MP is rising. When TP is increasing but at a decreasing rate, MP is positive but falling; when TP is at a maximum, MP is zero. Finally, when TP decreases, MP is negative.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern