microeconomics book solution 12

12 in your economics class each homework problem set

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12. In your economics class, each homework problem set is graded on the basis of a maximum score of 100. You have completed 9 out of 10 of the problem sets for the term, and your current average grade is 88. What range of grades for your 10th prob- lem set will raise your overall average? What range will lower your overall average? Explain your answer. 12. Any grade for your 10th problem set greater than 88 will raise your overall average; any grade lower than 88 will lower it. This is the same principle at work as that for average total cost and marginal cost. If the marginal cost curve (the 10th grade) is above the average total cost curve (the average over the first 9 grades), then the aver- age total cost is rising (that is, the average over the 10 sets is greater than the average over the 9 sets). And if the marginal cost curve (the 10th grade) is below the average total cost curve (the average over the first 9 grades), then the average total cost is falling (that is, the average over the 10 sets is lower than the average over the 9 sets). To see this arithmetically, note that your current average, 88, is found by = 88 = Average over first 9 sets Hence, Sum of grades for first 9 sets = 88 × 9 = 792 So your overall grade—the grade over all 10 problem sets—is + = Overall average If your 10th grade is 90, then your overall grade is + = 79.2 + 9.0 = 88.2 90 10 792 10 Grade for 10th set 10 792 10 Sum of grades for first 9 sets 9 C H A P T E R 1 2 B E H I N D T H E S U P P LY C U R V E : I N P U T S A N D C O S T S S-181 S171-S184_Krugman2e_PS_Ch12.qxp 9/16/08 9:22 PM Page S-181
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Solution which is greater than 88. And if your 10th grade is 86, then your overall grade is + = 79.2 + 8.6 = 87.8 which is less than 88. 13. Don owns a small concrete-mixing company. His fixed cost is the cost of the concrete- batching machinery and his mixer trucks. His variable cost is the cost of the sand, gravel, and other inputs for producing concrete; the gas and maintenance for the machinery and trucks; and his workers. He is trying to decide how many mixer trucks to purchase. He has estimated the costs shown in the accompanying table based on estimates of the number of orders his company will receive per week. a. For each level of fixed cost, calculate Don’s total cost for producing 20, 40, and 60 orders per week. b. If Don is producing 20 orders per week, how many trucks should he purchase and what will his average total cost be? Answer the same questions for 40 and 60 orders per week. 13. a. The answers are given in the accompanying table. b. Don should choose the number of trucks that minimizes average total cost for each level of output. Given this, Don should buy two trucks if he is producing 20 orders per week. His average total cost per order will be $400. He should buy three trucks if he is producing 40 orders per week. His average total cost per order will then be $270. He should buy four trucks if he is producing 60 orders per week.
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  • Spring '10
  • BRIANALLENHUNT
  • average total cost

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