Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 25, Problem 8CQ
To determine
Explain whether hiring of labor and capital minimizes the cost of dressmakers.
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Remembering the learning activity in Unit 3, the Gondwanaland chairman of production reported that the gosum berry growers could meet a demand of 700 barrels of gosum berries per month at a price of $70 per barrel.
Then the growers were plagued with a gosum berry bug infestation that reduced output, causing production to fall to only 600 barrels. This resulted in a price increase to $84 per barrel. The following table shows the chairman’s report:
Month
Monthly barrels of gosum berries demanded
Price per barrel
June
700
$70
July
600
$84
Using the midpoint method, show your work and calculate the price elasticity of demand for Gondwanaland gosum berries. Explain what this price elasticity of demand means?
Complete the table below by calculating what the monthly total revenue is for June, what the monthly total revenue is for July, and the change in total monthly revenue for these two months. How have these numbers changed?
(Enter your response…
The graph shows the Cost curves for a profit maximizing firm in a competitive market. If the market price is $30 and the firm produces at the profit maximum quantity, what is the amount of the total fix cost
Behind the Supply Curve: Inputs and Costs
Work It Out: Question 3 of 5
The accompanying table shows a car manufacturer's total
cost of producing cars.
Calculate the average variable cost (AVC), average total
cost (ATC), and average fixed cost (AFC) for a quantity of
3 cars and a quantity of 8 cars.
Round your answer to the nearest whole dollar.
AVC for producing 3 cars: $
ATC for producing 3 cars: $
AFC for producing 3 cars: $
Quantity of cars Total Cost
$500,000
540,000
560,000
570,000
590,000
620,000
660,000
720,000
800,000
920,000
1,100,00
0
1
2
3
4
5
6
7
8
9
10
Chapter 25 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- True or False ? Why ? In the long run, Betty’s factory produces 10,000 widgets with cost-minimizing combination of 0 units of capital and 100 units of labor. The rent (cost of capital) and the wage (cost of labor) are both $40 per day. Betty’s marginal rate of technical substitution must be greater than 1 (with L on the x-axis and K on the y-axis)arrow_forwardIsabella grows pumpkins. Her average variable cost (AVC), average total cost (ATC), and marginal cost (MC) of production are illustrated in the figure to the right. Assume the market for pumpkins is perfectly competitive and that the market price is $5.00 per box. How many pumpkins should Isabella grow? Isabella should produce integer value.) thousand boxes of pumpkins. (Enter your response as an Price ($ per box) 10.00- MG ATC AVC 9.00- a 8.00- G 7.00- 6.00- 5.00- 4.00- 3.00- 2.00- 1.00- 0.00- 0 2 3 5 6. Quantity (boxes in thousands)arrow_forwardA perfectly competitive market is in a long-run equilibrium. Prices of variable inputs for the typical firm decrease. Describe what will happen in the short run, to the typical firm’s marginal costs, average fixed costs, average costs, profits, and production as the firm makes its choices. In each case, describe why those changes take place. Describe exactly why the firm decides to make changes. As part of that discussion, summarize what happens in the market and how those changes relate to the typical firm. You do not need to discuss why the changes take place in the market. Outline in several sentences what will happen in the long run to the typical firm and the market.arrow_forward
- A firm in a perfectly competitive market uses only workers to produce output. The relationship between the number of workers and the amount of output is given in the table attached. Suppose the wage paid to a worker is $100, and the firm has fixed costs of $500. a. Complete the table by filling in marginal product (MP), variable cost (VC), total cost (TC), and marginal cost (MC). b.Suppose the price of the good they produce is $25. What quantity does this firm produce in the short run? What are its profits? Show your work and explain your answer. c. Is the market in long-run equilibrium? Explain. If it is not, explain what will happen to the price in the market and the quantity produced by each firm as the market transitions to long-run equilibrium.arrow_forwardIf the cost of plaster and labor were $13 per gnome and everything else is as in the problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which there would be a positive supply in the long run?arrow_forwardAssume a firm is trying to maximize output subject to a budget and is currently in the long run equilibrium shown below. Make changes to the graph to show the impact of a decrease in the wage. Make sure that the graph shows the new output-maximizing combination as well as the new levels labor and capital.arrow_forward
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