Question 14Which of the following can be said about sunk costs?ONone of the answers are correct.A sunk cost should be ignored when making decisions.In the short run, FC are sunk costs.Two answers are correct.2 ptsPreviousNext ▸

Correct Answer: "A sunk cost should be ignored when making decisions."What does "sunk cost" mean?A…

Answered: Question 14 Which of the following can…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 25RQ: In choosing a production technology, how will firms react if one input becomes relatively more...

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Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?
What is die difference between accounting and economic profit?
How does fixed cost affect marginal cost? Why is this relationship important?
Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method Choices are: Method 1: 50 units of labor, 10 units of capital Method 2: 20 units of labor, 40 units of capital Method 3: 10 units of labor, 70 units of capital If hiring labor for the winter costs $100/unit and a unit of capital costs 400, what is the best production method? What method should the company use if the cost of labor rises to $20/unit?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?
What are explicit and implicit costs?
A firms marginal cost curve above the average variable cost curve is equal to the films individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the films individual supply curve if marginal costs increase?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?

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Question 14 Which of the following can be said about sunk costs? O None of the answers are correct. A sunk cost should be ignored when making decisions. In the short run, FC are sunk costs. Two answers are correct. 2 pts Previous Next ▸