EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 12, Problem 6P
(a)
To determine
The new revenue if
(b)
To determine
Whether the price will rise or fall, if the elasticity is -2.
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After the ban is imposed, Joe’s firm switches to the more expensive biodegradable disposable cups. This increases the cost associated with each cup of coffee it produces.
Which cost curve(s) will be impacted by the use of the more expensive biodegradable disposable cups? Why? Which cost curve(s) will not shift, and why not? Please use the table below to answer this question. For the second column (“Impacted? If so, how?”), please use one of the following three choices: No shift; Shifts up (i.e., increases: at nearly any given quantity, the cost goes up); or Shifts down (i.e., decreases: at nearly any given quantity, the cost goes down). $
Cost Curve
Impacted? If so, how?
Explanation of the Shift: Why or Why Not
AFC
No shift.
Fix costs stay the same, regardless of quantity. Fixed cost is calculated as Fixed Cost/Quantity. Since fixed costs remain unchanged, AFC stays the same for each quantity.
MC
Shifts up.
Since the biodegradable cups are more expensive, the…
Styrofoam is non-biodegradable and is not easily recyclable. Many cities and at least one state have enacted laws that ban the use of polystyrene containers. These locales understand that banning these containers will force many businesses to turn to other more expensive forms of packaging and cups, but argue the ban is environmentally important.
Shane owns a firm with a conventional production function resulting in U-shaped ATC, AVC, and MC curves. Shane's business sells takeout food and drinks that are currently packaged in styrofoam containers and cups.
Graph the short-run AFC0, AVC0, ATC0, and MC0 curves for Shane's firm before the ban on using styrofoam containers.
d-f
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