a. How many barrels of oil will the firm extract in the first year? million barrels b. Suppose the user cost increases by $20 at the beginning of the year. Using the graph above, show the effect of this increase in user cost for Slippery Slope Oil Company. Instructions: Use the tool provided 'Total cost¡' to draw the new total cost curve when the user cost increases by $20 (at any quantity extracted). Plot only the endpoints of the line (2 points total). c. Now how many barrels of oil will the firm extract? million barrels d. Suppose the optimal extraction quantity for Slippery Slope is 500 million barrels of oil. Assuming that Slippery Slope faces the higher total cost (Total cost1), at what price would Slippery Slope extract and sell this quantity? 2$

a. How many barrels of oil will the firm extract in the first year? million barrels b. Suppose the user cost increases by $20 at the beginning of the year. Using the graph above, show the effect of this increase in user cost for Slippery Slope Oil Company. Instructions: Use the tool provided 'Total cost¡' to draw the new total cost curve when the user cost increases by $20 (at any quantity extracted). Plot only the endpoints of the line (2 points total). c. Now how many barrels of oil will the firm extract? million barrels d. Suppose the optimal extraction quantity for Slippery Slope is 500 million barrels of oil. Assuming that Slippery Slope faces the higher total cost (Total cost1), at what price would Slippery Slope extract and sell this quantity? 2$

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 that the following statement is true: "when L increases from 20 to 21, average product of L increases from 50 to 52." Indicate whether each of the following statement is true, false, or uncertain: explain your answers. 1. Output is 1000 when L is 20. 2. When L is 20, marginal product is increasing. 3. When output is 1000, average variable cost is downward sloping.
4. The shape of a firm's long-run average cost curve depends o how costs vary with scale of operation. Draw a long-run average cost curve for a firm that exhibits economies of scale, constant returns to scale, and diseconomies of scale. Identify each of these sections of the cost curve and explain why each section exemplifies its specific type of return to scale.
Refer to Figure 8.6, which shows just three of a firm's various possible short-run average cost curves. Suppose the firm is currently producing 160 units at an average cost of $90 per unit. Which of the following statements is true? $/unit 200 175 150 90 80 R 50 50 O ACI AC2 X 160 130 AC3 Output Figure 8.6 The firm could reduce its short-run average cost by producing less output. The firm is producing the level of output that minimizes short-run average cost. The firm is producing its output at the lowest possible long-run average cost. The firm could reduce its short-run average cost by producing more output.
8. Consider a firm's short run and long run average costs depicted below: 300 270 240 210 180+ Wunt 150 120+ 90 60 30 ---- W X AC LRAC 200 400 600 800 1000 1200 1400 1600 1800 2000 # of units Suppose this firm has been producing 400 units per month for a long time. If it decides to increase its output to 800 units per month, then its average cost will O A. fall from $300/unit to $150/unit initially, then rise to $240/unit eventually. O B. fall from $300/unit to $60/unit initially, then rise to $240/unit eventually. O C. fall from $300/unit to $60/unit and remain there. O D. fall from $300/unit to $240/unit and remain there. O E. rise from $150/unit to $240/unit initially, then fall to $60/unit eventually. OF. rise from $150/unit to $300/unit initially, then fall to $60/unit eventually. O G. fall from $150/unit to $60/unit and remain there. OH. rise from $150/unit to $240/unit and remain there.
Question 4 For a firm, the production function represents the relationship between OOO implicit costs and explicit costs. quantity of inputs and total cost. quantity of inputs and quantity of output. quantity of output and total cost. iz Instructions Question 5 Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product? O 15 pieces of pottery O22.5 pieces of pottery O 35 pieces of pottery O 55 pieces of pottery
Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Number of Factories Q = 100 1 74°F Clear 2 3 440 620 800 Q = 200 280 380 480 Average Total Cost (Dollars per bike) Q = 300 Q = 400 240 320 240 320 240 240 Q = 500 480 380 280 Q = 600 800 620 440 Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $440 per bike. Suppose Ike's Bikes is expecting to produce 100 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using one factory On the following graph, plot the three SRATC curves for Ike's Bikes from the…
QUESTION 6 At a total cost of $3,100, a company can produce 4 scooters. It has fixed costs of $1,000. If it produces 5 scooters, the costs of production total $3,800. Which of the following statements is true? O Variable costs of producing 4 scooters total $3096. O The average (or per unit) cost of producing 5 scooters is $800 per scooter The total cost curve for this firm is downward sloping Fixed costs will be higher when it produces 5 scooters The marginal cost of producing the fifth scooter is $700
shows the long-run average costs for three firms. Quantity Ali's Hats 1 2 3 4 5 6 7 $110 60 90 115 150 220 300 Bodi's Bats $110 80 70 70 70 70 90 Cody's Mats $110 90 80 70 50 20 30 a) In which industry, Hats, Bats or Mats, would there likely be many small firms? Industry: (Click to select) · b) In which industry, Hats, Bats or Mats, would there likely be firms of many different sizes? Industry: (Click to select) - c) Which industry Hats Bats or Mats, would likely be dominated by a few large firms? Industry (Click to select) Hats Bats Mats
Consider the same firm from the Monday assignment but now let's call that cost schedule total variable cost. Q 1 2 3 4 5 6 7 8 9 TVC 12 20 24 28 34 42 52 64 78 And let's imagine that there is fixed costs of 18 which is sunk in the short run. a. Show this firm's average total cost, average variable cost and marginal cost on a graph. Indicate the efficient scale (I don't think the book uses the words "efficient scale" but it's the quantity where profit would be zero when P=MC. We will discuss what I mean by "efficient scale but probably not before Thursday. By "indicate" I mean give the quantity and MC. I don't need every point to be exactly to scale, I just care about the general shape of the curves, where things cross and the location and…
. The marginal cost when output = 10 is equal to a. the slope of a line drawn tangent to the total cost curve where output = 10. O b. the total cost of 10 units of output divided by 10. c. the average cost of 10 units of output. d. the slope of a ray drawn from the origin to the point on the total cost curve where output = 10. %3D
Which is most hkely to be a constant cost industry? O a Widgits do not require specialized equipment or workers, and Widgits have been produced the same way for a long time O b. Gadgets require a special metal, and the world is starting to run out of this metal Oc Gruffles require a special metal, and people have just started to use this metal. Now, engineers are quickly finding better ways to mine this metal. Od. These are all equally likely to be constant cost industries Oe. None of these could be constant cost industries In Canada, here is the market for Woogets Quantity Demanded- 300 - P Quantity Supplied = 2P The world price is 50, and Canadians can buy and sell as much as they want at this price. What is consumer surplus in Canada, if there is completely open trode? Write the answer as a number. For example, if you think the answer is 100,971, write 100971
3. The relationship between marginal product and marginal cost Brian's Big Burger is a small restaurant that sells hamburgers. For Brian, grills are a fixed input and workers are variable inputs. Assume that labor is Brian's only variable cost. Brian has a fixed cost of $100 per day and pays each of his workers $80 per day. Brian's total output schedule and total cost at each level of labor are presented in the following table. Fill in the blanks to complete the Marginal Product column for each worker and the Marginal Cost column at each level of labor. (Hint: Marginal cost is the change in total cost divided by the change in the quantity of output. You can calculate it here by dividing the increase in total cost from hiring one more worker by the marginal product from hiring one more worker.) Labor Input Total Output Marginal Product Total Cost Marginal Cost (Number of Workers) (Burgers per day) (Burgers per day) (Dollars per day) (Dollars per burger) $100 2$ 1 40 $180 2 120 $260 160…