Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 14, Problem 1IAPA
To determine
To find:
The store having the lowest total cost and the lowest marginal cost, and the reason for surety of the lowest total cost and lowest marginal cost.
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Explain the shapes of the marginal and average cost curves of a firm. Use a diagram to support your answer.
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We expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. What might explain this?
Chapter 14 Solutions
Foundations of Economics (8th Edition)
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- Each graph below illustrates three short run cost curves for firms, where ATC is Average Total Cost (aka Average Cost), MC is Marginal Cost, and AVC is Average Variable Cost. Based on what you know about the relationships between these curves, which of the following graph is correct? MC ATC ATC AVC AVC B. MC MC ATC AVC ATC AVC D. MC AVC ATC E. D. OAarrow_forwardHow can a company have a competitive advantage without scale?arrow_forward“A firm that earns only normal profit is not covering all its costs.” Do you agree or disagree?arrow_forward
- The following table shows data for quantity (Q), variable cost (VC), and fixed cost (FC) for a ski company. a) Fill the table for total cost (TC), average variable cost (AVC), average total cost (ATC), and marginal cost (MC). Make sure to show your work for at least one line. Q VC FC TC ATC AVC MC 30 1 10 30 25 30 3 45 30 4 70 30 100 30 6 135 30 b) Now suppose the firm decides to produce a quantity of 5 units (Q=5), and it sells for a price of $25 each. Answer the following: 1. Calculate the company's profits or losses 2. How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? 3. At the given quantity and price, is the marginal unit produced adding or subtracting to profits? Should the fırm produce at this level of output?arrow_forwardWe expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. Why?arrow_forwardNimbus, Inc., makes brooms and then sells them door-to-door. Here is the relationship between the number of workers and Nimbus' output during a given day. I have completed the first two rows. Workers Output Marginal Total Average Marginal Product Cost Total Cost Cost $200 1 20 20 $300 $15 $5 2 50 30 $400 $8 $3.33 3 90 40 4 120 30 140 20 150 10 7 155 5arrow_forward
- What happens to the average fixed cost, when the output of a firm increases.arrow_forwardThis is a graph of our firm’s costs. Label the lines on the graph using the following labels: average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) marginal cost (MC). Then label the shut down and breakeven points on the graph.arrow_forwardSarah's copy shop can use four alternative plants. The figure shows the average total cost curves for Plant 1 (ATG), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATCA). What is Sarah's long-run average cost if the output is 3,000 copies per day? 10 ATC ATC ATC, ATCA 6 10 Quantity (thousands of copies per day) Select one: O a. 3.7 cents per copy 8.5 cents per copy c More information is needed to determine the long-run average cost O d.5.0 cents per copy Average cost (cents per copy)arrow_forward
- In 1796, Gottfried Christoph Härtel, a German music publisher, calculated the cost of printing music using an engraved plate technology and used these estimated cost functions to make production decisions. Härtel figured that the fixed cost of printing a musical page—the cost of engraving the plates—was 900 pfennings. The marginal cost of each additional copy of the page is 5 pfennings (Scherer 2001). a. Graph the total cost, average total cost, average variable cost, and marginal cost functions. b. Is there a cost advantage to having only one music publisher print a given composition? Why? c. Härtel used his data to do the following type of analysis. Suppose he expects to sell exactly 300 copies of a composition at 15 pfennings per page of the composition. What is the greatest amount the publisher is willing to pay the composer per page of the composition?arrow_forwardWhy is the Average Variable cost U-shaped?arrow_forwardUsing the figure above, what is the total cost for the firm?arrow_forward
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