a. Pro-duo:- tlleorv with lsoquantr. A. ha a
Suppose a firm has two Inputs, capltal and labor. The followlng table shows how mud-I labor the rm needs to
produce 2GB, 4GB, or 600 units of output If it has 1, 2, 3. or 4 unit: of capital:
Labor Input [Hours]
For each price in the following table, use the graph to deterrnlne the number of lamps this rrn would produce In order to
maximize its profit. Assume that when the price Is exactlv equal to the average variable cost, the rm Is Indifferent between
For each prloe in the following table, calculate the flrrn's optimal quantity of units produced and determine the prot or loss If it
produces at that quantity, using the data from the previous graph to identify its total variable cost. Assume that if the
Plot the results for each game and Illctcrs overall average free-throw percentage after each game on the followlng
graph. Use the green polnts [triangle symbol] to plot Ulctor's overall average, and use the orange polnt: [square
svmbol to plot hls result
Costs and the Changes at Firms over Time
Graded Assignment | Read Chapter 8 | Back to Home Due Sunday 01.19.14 at 11:45 PM
ThE problem set introduces short-mo and long-mo costs, input selection with one variable input, the choice of optimal input
Explanation: close A
The rm will choose to produce the quantity at which Pfor = MC. At a price of $5 per hear, that quantity Is 10,000 pears per
oav; at a price of $12 per bear, that quantity ls 30,000 hears per day: and at a price of $10 per hear, that
On the following graphIr plot DFs average total cost cfw_ATE curve uslng the green points (triangle svmbol. Next, plot its average
variable cost cfw_AVE curve uslng the purple polnts [diamond svmool]. Flnallv, plot Its marginal oost (MC) curve using the o
2. Inputs and outputs an Aa =
Larnr's Perfon'rlanoe Pizza Is a small restaurant In Chicago that sells gluten-free pizzas. Lamr's wentr tiny kitchen bame has
enough room for the two ovens In which his workers bake the pizzas. Larry signed a lease obllgatin
On d1e previous graph, use the blue rectangle (circle symbols) to shade the area representing the firms prot or loss If the
market price Is $8 and the rm chooses to produce the quantity you already selected. Tool tlp: Mouse over the shaded region on
You can thInk of the result In anv one game as belng Victor's "marglnal free-throw percentage." Based on vour
previous answer, you can deduce that when 'v'lttor's marglnal free-throw percentage Is above the average, the
average must be rising of .
Assume that labor is Larnfs only varlable cost If he has a xed cost of $100 per day and pays each of his women's $6D per day,
use the orange polnts (square symbol) to plot Larry's total cost curve on the folluwlng graph using the quantltles from the
In the long run. if the rm decides to keep output at its Inltlal level, It will likely:
0 Shut clown
O Shift to operate on ATCI
O Shift to operate on ATC3
Explanation: Elm A
In the short run, the firm can choose to operate at any point a
li'tiu can now applyr this analvsls to production costs. When the marginal cost curve Is below the average total cost
curve, the average total cost must be decreasing v . When the marginal cost curve is above the average total
cost curve, the average tota
6. Costslnseshortrunversmlnselongrun Aa Aa a
Ike's Bikes is a major manufacturer of bicycles. Currently, the oompanv produces hikes In one factory. However, it
is oonsidering expanding production to two or even three factories. The following table shows t
4. Prot maximization In the cost curve diagram A: Ail E
Conslder a oompetltlue market for teddy bears. The following graph shows the daily oost curves of a rm operating In thls
PRIEE AND COST IDollars per bear]
1. Various measures ofcoot A: Aa Ea.
Douglas Fur (0F) Is a small manufacturer of fake-fur boots In Chicago. 1135 total cost or production is given In the following table.
Fill in the remaining cells of the table.
Quantity Total Cost Marginal cost Fixed
The law of dimlnlshlng returns to labor ls demonstrated by whlch of the following?
0 Total output decllnes as you Increase the quantlty of labor.
0 Total output Increases only when you Increase both labor and ovens.
of Q Total output Increases at a decrea
1. Lnnn-runmtrelatlhnshlps na Aa 2
The fpllpwlng graph shpws the short-run average total east curves and the one lung-run average total cast curve for
a publishlng rm. The ve marked quanties show where each short-run average total east cfw_ATE curve is ta
In the long run, over which range of output levels does Ike's experience diseoonornles of scale?
of E] More than 400 bikes per month
0 Between 200 and 4GB oli<es per month
0 Fewer than 200 bikes per month
Explanation: Bloc A
A rm EXDEI'IEI'IDES diSEDDI'
0n the following graph, use the orange polnts (square symbol) to plot the portlon of the llrrn's short-run supply curve that
con-responds to prlces where there Is posltlue output. Une segments wlll automatlncallyI connect the polnts. Remember to plot
Explamtlon: Blue A
The Average Total lCost table provldes data for each of the three short-run average total cost curves. The point for
each output level that corresponds to the lowest possible average total cost prcvldes data for the long-run
5. Deriving the short-run supply curve A3 113 E
Cohslder the competltlve market for ceiling halogen lamps. The following graph SI'IDWS the marginal CD51 cfw_MC, average total 0051
cfw_ATCL and average varlable cost cfw_AVE curves for a typical rm In the I
If a firm shuts down, It lncurs its xed costs [FE]: In the short run. In this case, the fixed cost of the rm producing teddy bears
is $102,000 per day. In other words, if lt shuts down, the rm would suffer losses of $102,000 per day until its xed costs en
The following graph shows the firms Iscquant curve con-esponding to an output of 200 units. Using the green line
[triangle symbols], add the lowest isoccst line that the firm can attain at the given prices for capital and labor.
CAPITAL [Units of capital]
3. The relationship between marginal and average costs Aa Aa
Consider the following scenario to understand the relationship between marginal and average values.
Suppose Victor Is a professional basketball player, and his game log for free throws can be su
Summary of market
structures & of market failure
Summary of market structures
Market failure: definition & examples
Role of government, i.e., anti-trust policy
Other types of market failure
Externalities: positive and negative
Theory of Consumer Choice
Utility: total utility vs. marginal utility
Law of diminishing marginal utility
The budget contraint and maximizing
utility: the utility maximizing rule
What is utility?
Utility is NOT usefu