1 calculate the marginal cost for the additional unit

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Unformatted text preview: is greater than marginal cost. Does this strategy have any0123456 01234560123456 thing to do with the firm’s objecQ Q Q tive to maximize profit? Explain. ( a) (b) (c) How does a firm compute its profit or loss? Doing the Math Do the calculations necessary to solve the following problems. 1. Calculate the marginal cost for the additional unit in each of the following cases. (TC total cost, and Q = quantity of output.) a. Q 100, TC $4,322; Q 101, TC $4,376 b. Q 210, TC $5,687; Q 211, TC $5,699 c. Q 547, TC $10,009; Q 548, TC $10,123 2. Calculate the average total cost in each of the following cases. (TC total cost, and Q quantity of output.) a. Q 120, TC $3,400 b. Q 200, TC $4,560 c. Q 150, TC $1,500 3. The marginal benefit of playing chess (in money terms) is $10 for the first game of chess, $8 for the second, $6 for the third, $4 for the fourth, $2 for the fifth, and $0 for the sixth. The marginal cost of playing chess (in money terms) is always $5. What is the right number of games of chess to play? Explain your answer. 4. Look at Exhibit 7-6. Suppose it costs a firm $45 a day to hire the fifth worker. What does the price of the good the firm produces have to be before it is worth hiring the fifth worker? 1. Jim pays more to produce the second unit of the good than the first, more for the third than the second, and so on. 2. The additional “benefits” of producing the fourth unit of the good are the same as the additional benefits of producing the fifth. 3. Marginal revenue is constant over a specific quantity of the good produced. 4. Marginal revenue declines as the firm sells additional units of the good. Solving Economic Problems 1. Application. When Dairy Queen first began, it did not require franchisees to handle all Dairy Queen products. In contrast, McDonald’s requires its franchisees to handle all of its products. If you were a franchiser, what kind of agreement would you want, and why? Go to www.emcp.net/economics and choose Economics: New Ways of Thinking, Chapter 7, if you need more help in preparing for the chapter test. Chapter 7 Business Operations 185...
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