Economics Problems

Good Essays
552 Words
Grammar
Plagiarism
Writing
Score
Economics Problems
Homework #3:

Question 1. Problem and Application 4 on page 285. Please work on a, b, c, d, and e only. That is, ignore f. When you reconstruct the table in your work, please lower the space for Marginal Product and Marginal Cost by a half step. In other words, the first entries of Marginal Product and Marginal
Cost should be aligned with the second entries of other columns. (50 points)

Table of Costs:
Worker Output Marginal Product Total Cost Average Total Cost Marginal Cost
0 0 -- \$200 ------ -----
1 20 20 300 \$15.00 \$5.00
2 50 30 400 8 3.33
3 90 40 500 5.56 2.50
4 120 30 600 5 3.33
5 140 20 700 5 5
6 150 10 800 5.33 10
7 155 5 900 5.81 20

A. The table shows the marginal product; marginal product rises at first, but then starts to decline because of diminishing marginal product.
B. The table shows the total costs for this scenario.
C. Again, the table shows the average total cost. The average total cost will be shaped like a “U.” The average total cost declines as quantity rises when the quantity is low. When the quantity is high, the average total cost rises.
D. The table shows the marginal cost. The marginal cost, like the average total cost, is also “U” shaped, but unlike the average total cost it rises steeply as the output increases. This is because of diminishing marginal product.
E. When the marginal cost is falling, the marginal product is rising and vice versa.

Question 2. (20 points) The licorice industry is competitive. Each firm produces 2 million strings of licorice per year. The strings have an average total cost of \$0.20 each, and they sell for \$0.30.

a. What is the marginal cost of a string?

Marginal cost = Change in total cost/change in quantity .30-.20=.10=Change in total cost .10/1=.10 The marginal cost of one string is \$0.10.

b. Is this industry in long-run equilibrium? Why or why not? No. In a long

You May Also Find These Documents Helpful

• Powerful Essays

Economics 101

• 1678 Words
• 4 Pages

7. At P’ in the diagram above, b inventories will be unitentionally increased, and the price…

• 1678 Words
• 4 Pages
Powerful Essays
• Good Essays

A firm would operate for maximum profit where the MFC = _________. MRP If a decrease in the price of cars decreases the marginal revenue product of auto workers, then _____________ in the demand for their labor will occur. a decrease…

• 3910 Words
• 10 Pages
Good Essays
• Better Essays

Chapter 11

• 2231 Words
• 21 Pages

7. Marginal cost is: A) the change in total cost from producing one more unit of output.…

• 2231 Words
• 21 Pages
Better Essays
• Powerful Essays

Ans. Marginal cost is increasing. 3. In exhibit 1 below, when the price is \$5, the firm:…

• 1720 Words
• 6 Pages
Powerful Essays
• Satisfactory Essays

Name:____________________________ COMPARATIVE ADVANTAGE PRACTICE SHEET Directions: For each constant cost problem below, answer the following questions after creating a cost ratio table:…

• 394 Words
• 2 Pages
Satisfactory Essays
• Good Essays

(a) Using diagrams, explain what happens to the marginal cost, average variable cost and average costs curves.…

• 633 Words
• 3 Pages
Good Essays
• Good Essays

a. \$66 b. \$76 c. \$906 d. \$946 3.) Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is \$40, and the average total cost when three workers are hired is \$50. What is the total cost of production when three workers are hired?…

• 3052 Words
• 27 Pages
Good Essays
• Good Essays

marginal cost rises above average total cost, and average total cost starts to rise. So the…

• 2356 Words
• 24 Pages
Good Essays
• Satisfactory Essays

a. | diminishing labor. | b. | diminishing output. | c. | diminishing marginal product.…

• 361 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Assume the unit-cost data shown in the Table 1 below is for a perfectly competitive poducer:…

• 329 Words
• 2 Pages
Satisfactory Essays
• Powerful Essays

M3A2

• 659 Words
• 3 Pages

| Column 11 | Output | Price per unit | Total Fixed Cost | Total Variable Cost…

• 659 Words
• 3 Pages
Powerful Essays
• Good Essays

D. fixed costs per unit will change and variable costs per unit will remain the same.…

• 1769 Words
• 8 Pages
Good Essays
• Good Essays

returns to scale. A. The law of diminishing marginal productivity states that if one input in the production of…

• 1899 Words
• 8 Pages
Good Essays
• Good Essays

Practice Mid-Term

• 3364 Words
• 14 Pages

5. When marginal cost is rising, average variable cost a. must be rising. b. must be falling.…

• 3364 Words
• 14 Pages
Good Essays