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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
tive to maximize profit? Explain.
How does a firm compute its
profit or loss? Doing the Math
Do the calculations necessary to solve the following
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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- Winter '14