4.4 Older oil wells that produce fewer than 10 barrels of oil a day are called “stripper" wells. Suppose thatyou and a partner own a stripper well that can produce 8 barrels of oil per day, and you estimate that themarginal cost of producing another barrel of oil is $80. In making your calculation, you take into accountthe cost of labor, materials, and other inputs that increase when you produce more oil. Your partner looksover your calculation of marginal cost and says: “You forgot about that bank loan we received two yearsago. If we take into account the amount we pay on that loan, it adds $10 per barrel to our marginal costof production." Briefly explain whether you agree with your partner's analysis.

Answered: 4.4 Older oil wells that produce fewer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a pizza parlor has the following production costs: $3.00 in labor per pizza, $2.00 in ingredients per pizza, $0.30 in electricity per pizza, $4,000 in restaurant rent per month, and $400 in insurance per month. Assume the pizza parlor produces 8,000 pizzas per month. What is the variable cost of production (per month)? The variable cost of production is $ (Enter your response as an integer.)
Sandra and Trey operate a small company that produces souvenir footballs. Their fixed cost is $2,000 per month. Each worker costs $1,000 per month. Their monthly production function for footballs is as given in the accompanying table. Quantity of labor (workers) 2. a. 0 2 3 Quantity of footballs 5 0 300 800 1,200 1,400 1,500 :) For each quantity of labor, calculate average variable cost (AVC), average fixed cost (AFC), average total cost (ATC), and marginal cost (MC). b.) On one diagram, draw the AVC, ATC, and MC curves.
Production Total Product Total Fixed Cost Total variable cost Total Cost Average fixed cost Average variable cost Average Total Cost Marginal Cost 0 0 1 25 2 45 3 60 4 70 5 85 6 105 7 135 8 180 9 240 10 315 Assume that fixed costs are $50, labor is the only variable input and its costs are reflected completely in the costs above. Complete the table Graph AFC, AVC, ATC, and MC Explain how increasing returns and decreasing returns are depicted in your graph If the labor input increased by $10 at every unit of production, what would be the effect on your graphs?
6. Firm's Costs 2 Consider the following cost information for a pizzeria: Quantity Total Cost Variable Cost (Dozens of pizzas) (Dollars) (Dollars) 280 1 320 40 2 350 70 3 380 100 4 420 140 470 190 6 530 250 The pizzeria's fixed cost is Complete the third column of the following table by calculating the marginal cost per dozen pizzas using the information on total cost. Then complete the final column by calculating the marginal cost per dozen pizzas using the information on variable cost. Quantity Total Cost Marginal Cost Variable Cost Marginal Cost Using Total Cost (Dollars) Using Variable Cost (Dollars) (Dozens of pizzas) (Dollars) (Dollars) 280 320 40 350 70 AA
Suppose a pizza parlor has the following production costs: $5.00 in labor per pizza, $3.00 in ingredients per pizza, $0.20 in electricity per pizza, $1,500 in restaurant rent per month, and $250 in insurance per month. Assume the pizza parlor produces 1,000 pizzas per month. What is the variable cost of production (per month)? The variable cost of production is $ (Enter your response as an integer.) What is the fixed cost of production (per month)? The fixed cost of production is $ ☐. (Enter your response as an integer.)
4. Variouss measures of cost Douglas Fur is a small manufacturer of fake-fur boots in San Diego. The following table shows the company's total cost of production at various production quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost (Dollars) Fixed Cost Variable Cost Average Variable Cost Average Total Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars per pair) (Dollars per pair) 120 1 200 2 240 3 285 4 340 425 6 540 On the following graph, plot Douglas Fur's average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $200, so you should start your ATC curve by placing a green point at (1, 200). For MC, plot the points between the integers:…
will need to upload your answers. Assume a company is producing 600 units of output per day and minimizing total cost with the following isoquant graph. Both the price of labor (w) and the price of capital (r) are $100 per day. Now assume they want to increase production to 800. Use the graph and complete sentences (and the numbers from the situation provided) to explain whether marginal cost would be higher in the short run or long run or will the MC be the same in both the SR and LR. That is, what is the MC is the short run and the MC in the long run? Explain. KI
Fill in the following cost table. For the first few rows, you can work from left to right. However, as you get to the last two rows, you will need to use the information from the right side of the table to work back to the left side. We do not calculate average costs at a quantity of 0. Q TFC TVC TC AFC AVC ATC MC 0 5,000 0 XXXXXX XXXXXX XXXXXX XXXXXX 1 3.000 3,000 2 5,000 3 11,000 4 3,250 5 4,000 Can you tell if this is the short run or long run? Can you tell which level of output yields the highest profit? If so, what is the output level? If not, explain. Economists define the “Break-even Price” as the lowest point on the average total cost curve or the lowest average total cost given in a table. What is the break-even price in this problem? Economists define the “Shutdown Price” as the…
1.In 1984, British prime minister Margaret Thatcher decided to shut down so called uneconomic coal mines owned by the government. The National Union of Mineworkers protested , asserting that there was enough coal in the mines to continue current levels of production for years .Thatcher implicitly argued that her decision was economically sound because at any practical output, for "uneconomic" mine. a) MC>AC b) for every input MPP >APP c) MC>MR d) AC >MC 2.Economics can decide a) the appropriate trade off between fairness and efficiency b) Which pricing arrangement are fair and which are unfair . c) whether a pricing decision will impose inefficiency costs on society. d) all of the above. 3.In long run equilibrium , the perfectly competitive firm produce a) where P=MC=AC b) at the lowest point on its long run average cost curve . c) where its long run average cost curve is tangent to its horizontal demand curve. d) all of the above .
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus (and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote, what must be true of the plant's average cost of production curve? A) It is U-shaped. 9 It is a ray from the origin. B) It is upward-sloping. D) It is downward-sloping.
The following table depicts the number of grapes that can be picked in an hour with varying amounts of labor: Number of pickers (per hour) 1 2 3 4 5 6 7 8Output of grapes (in flats) 10 28 43 54 61 64 65 61Calculate marginal physical product (MPP) and then graph the total product (output) and MPP curves.
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid $200 per day and the greenhouse is rented for $500 per day. Fill in total cost in the table below. (Enter your responses as integers.) Labor Capital Output Total Cost 0 1 0 $ 1 1 160 2 1 480 3 1 640 4 1 720 5 1 760

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