The most efficient scale of production when Q= 65 is to be determined. Concept Introduction: Efficient scale of production : is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Question

1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

Answer 1

Question

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

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1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

A health study tracked a group of persons for five years. At the beginning of the study, 20%were classified as heavy smokers, 30% as light smokers, and 50% as nonsmokers. Resultsof the study showed that light smokers were twice as likely as nonsmokers to die duringthe five-year study, but only half as likely as heavy smokers.A randomly selected participant from the study died during the five-year period. Calculatethe probability that the participant was a heavy smoker

Consider two assets with the following returns: State Prob. of state R₁ R2 1 23 13 25% 5% 2 -10% 1% Compute the optimal portfolio for an investor having a Bernoulli utility of net returns u(r) = 2√√r+ 10. Compute the certainty equivalent of the optimal portfolio. Do the results change if short-selling is not allowed? If so, how?

Answer 2

Question

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

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Answer 3

Question

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

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Answer 4

Question

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Expert Solution & Answer

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Answer 5

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Answer 6

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Answer 7

Chapter 7, Problem 4.10P

A

To determine

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Answer 8

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Answer 9

B

To determine

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Answer 10

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Answer 11

C

To determine

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Answer 12

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Answer 13

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Answer 23

Ch. 7 - Prob. 1.1P Ch. 7 - Prob. 1.2P Ch. 7 - Prob. 1.3P Ch. 7 - Prob. 1.4P Ch. 7 - Prob. 2.5P Ch. 7 - Prob. 2.6P Ch. 7 - Prob. 3.7P Ch. 7 - Prob. 3.8P Ch. 7 - Prob. 3.9P Ch. 7 - Prob. 4.10P

The most efficient scale of production when Q= 65 is to be determined. Concept Introduction: Efficient scale of production : is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Concept explainers

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Chapter 7 Solutions

The most efficient scale of production when Q= 65 is to be determined. Concept Introduction: Efficient scale of production : is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

Concept explainers

To Determine: The most efficient scale of production when Q= 65 is to be determined. Concept Introduction: Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine: The most efficient scale of production when Q= 75 is to be determined. Concept Introduction: Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine: The long run average cost is to be traced on the diagram. Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.

Chapter 7 Solutions

To Determine:

The most efficient scale of production when Q= 65 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine:

The most efficient scale of production when Q= 75 is to be determined.

Concept Introduction:

Efficient scale of production: is defined as the point which is the lowest and where the firm (or plant) can produce so that the long run average costs are minimized.

To Determine:

The long run average cost is to be traced on the diagram.

Concept Introduction: The long run average cost curve is the lowest cost curve for each output level.