Suppose a firm is currently maximizing profit by producing 100 units of output per day. It is then discovered that the firm owes $1,000 for a one-time tax violation that occurred a few years ago. The firm now needs to pay the $1,000 to the government no matter what. How should the firm react to this additional cost? The firm should increase output in order to increase revenue enough to cover the additional cost. The firm should continue to produce 100 units of output per day, as the $1,000 is a sunk cost and therefore has no effect on production decisions. O The firm should shut down in the short run and start back up in the long run. O The firm should decrease output in order to decrease variable costs by $1,000.

Suppose a firm is currently maximizing profit by producing 100 units of output per day. It is then discovered that the firm owes $1,000 for a one-time tax violation that occurred a few years ago. The firm now needs to pay the $1,000 to the government no matter what. How should the firm react to this additional cost? The firm should increase output in order to increase revenue enough to cover the additional cost. The firm should continue to produce 100 units of output per day, as the $1,000 is a sunk cost and therefore has no effect on production decisions. O The firm should shut down in the short run and start back up in the long run. O The firm should decrease output in order to decrease variable costs by $1,000.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose that the Travnikar Corporation manufactures widgets. Analysts that work for the company have found a function C(x) which reports the cost to produce x widgets and a function R(x) which reports the total revenue from selling x widgets. Currently, the company is producing 500 widgets, but the analysts find that R'(500)=85 and C'(500)=79. In order to maximize profits, should the analysts recommend increasing or decreasing production?
A firm's profit function is T(q) = R(q) – C(q) = 40q – (35 + 20q + - 10q²). What is the positive output level that maximizes the firm's profit (or minimizes its loss)? What is the firm's revenue, variable cost, and profit? Should it operate or shut down in the short run? The output level at which the firm's profit is maximized is q =. (Enter your response as a whole number.) At this level of output, the firm's revenue (R) is $ (Enter your response as a whole number.) At the profit-maximizing level of output, the firm's variable cost (VC) is $ - (Enter your response as a whole number.) Profit (T) is $ (Enter your response as a whole number and include a minus sign if necessary.) The firm should produce in the short run.
The implications of diminishing marginal returns is that: Group of answer choices beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. the demand for goods produced by purely competitive industries is downsloping.
Which statement must be false? a) When a firm has increasing returns to scale in production, its marginal cost curve will be downward sloping. b) When a firm has constant returns to scale, its total cost curve will be an upward sloping line. c) When a firm has diminishing returns to scale in production, its average cost curve will be upward sloping. d) Every firm faces eventually diminishing returns to scale, where its average cost curve reaches its minimum.
Price ($/slice) For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit- maximizing level of output and how much profit will this producer earn if the price of pizza is $2.50 per slice? Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Then, indicate the profit-maximizing level of output on the graph. 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 0 Cost Curves Tools -O Select ▼ Select ▼ Select ▼ Q* 100 200 300 400 500 600 700 800 900 Quantity (slices/day)
= The short-run marginal and average cost curves for a firm are displayed below. When q = 2 and q = 5, the marginal cost is $3. When q 5, the average cost is $5. Assume the firm has a fixed cost of $5 and they can sell each unit of output at a price of $3 (p = 3). What is the profit- maximizing level of output for the firm in the short-run? Profit maximizing q = LA $ 5 3 2 5 MC AC q
A firm's profit function is (q) = R(q) - C(q) = 140q-(410+20q+10q²). What is the positive output level that maximizes the firm's profit (or minimizes its loss)? What is the firm's revenue, variable cost, and profit? Should it operate or shut down in the short run? The output level at which the firm's profit is maximized is q = (Enter your response as a whole number.) At this level of output, the firm's revenue (R) is $. (Enter your response as a whole number.) At the profit-maximizing level of output, the firm's variable cost (VC) is $ Profit (x) is $. (Enter your response as a whole number and include a minus sign if necessary.) The firm should in the short run. (Enter your response as a whole number.)
Assume that the sale price of chairs is always sufficiently high that it is profitable to fulfill this 80-chair order. The firm needs to make 80 chairs to fulfill its order. Assume also that the firm is profit maximizing (& therefore cost minimizing). What combinations of robot and worker hours must they use to minimize costs? Show your work. Use the equation that must be true for cost minimization
Lesson 8 - Costs Question 2
Increasing returns and imperfect competition: (a) The production function for the word processor is Y = X – 100 million if X is larger than 100 million, and zero otherwise. By spending $100 million, you create the first copy, and then $1 must be spent distributing it (say for the DVD it comes on). For each dollar spent over this amount, you can create another copy of the software. (b) The production function is plotted in Figure 6.5. Output is zero whenever X is less than 100 million. Does this production function exhibit increasing returns? Yes. We spend $100 million (plus $1) to get the first copy, but doubling our spending will lead to 100 million copies (plus 2). So there is a huge degree of increasing returns here. Graphically, this can be seen by noting that the production function “curves up” starting from an input of zero, a common characteristic of production functions exhibiting increasing returns. (Constant returns would be a straight line starting…
A firm's short-run production function is q = 3L0.2, while its cost function is C = 2L. Furthermore, the firm can sell its output in a perfectly competitive market at p = 40. 6.1 Find the value of the firm's profit when L = 50. L that satisfies the first-order condition for profit 6.2 Calculate the level of maximization. 6.3 Calculate the value of the second order derivative (SOD) that ensures profit is being maximised at the value of L found in 6.2 .