EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Question
Chapter 8, Problem 8TY
To determine
Profit maximizing level of output for the firm.
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suppose the average variable cost of production is $15 when output equals 110 haircuts and $17.26 when output equals 140 haircuts. If the firm wants to maximize profit how many haircuts will it produce at what cost? explain your answer.
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?
Use the table below to answer the following question.
Units
Total Fixed Cost
Total Variable
of Output
(dollars)
Cost (dollars)
1
150
25
2
150
48
3
150
70
150
100
What is the marginal cost (MC) of producing the fourth unit of output?
Chapter 8 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- According to the accompanying table, what quantity of output should the firm produce? Explain your answer.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_forwardDouglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company’s total cost of production at various production quantities. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $155, so you should start your ATC curve by placing a green point at (1, 155). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $95, so you should start your MC curve by placing an orange square at (0.5, 95).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.arrow_forward
- a) How do you derive the marginal cost (MC) curve of a firm?b) How are average variable cost (AVC) and marginal cost (MC) curvesrelated? Explain.arrow_forwardWhy will firms in most markets be located at or close to the bottom of the long-run average cost curve?arrow_forwardUsing the figure above, what is the total cost for the firm?arrow_forward
- Douglas Fur is a small manufacturer of fake-fur boots in San Diego. The following table shows the company’s total cost of production at various production quantities. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $210, so you should start your ATC curve by placing a green point at (1, 210). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $90, so you should start your MC curve by placing an orange square at (0.5, 90).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.arrow_forwardShow the effect of diminishing returns on the marginal and average cost curves of a firm in the short-run. (be sure to explain your diagrams)arrow_forwardDouglas Fur is a small manufacturer of fake-fur boots in Chicago. The following table shows the company’s total cost of production at various production quantities. Fill in the remaining cells of the following table. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $200, so you should start your ATC curve by placing a green point at (1, 200). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $80, so you should start your MC curve by placing an orange square at (0.5, 80).) Note: Plot your points in the order in which you would like them connected. Line segments…arrow_forward
- For each statement below, explain whether it is TRUE or FALSE. In addition, defend your answer with an explanation. (a) True or False? "In the short run, the gap between average total costs and average variable costs should grow as a company produces higher levels of output." (b) True or False? "In the long run, a firm's average fixed costs should decline as the firm produces higher levels of output." (c) True or False? "Whenever marginal costs are below average total costs, the firm's average total costs will decline."arrow_forwardIn the short run, the marginal cost of the first unit of output is $40, the average variable cost of producing three units of output is $32, and the marginal cost of producing the second unit of output is $32. What is the marginal cost of producing the third unit of output? (Correct answer is $24)arrow_forwardUsing the Diagram above, answer the following questions: b). Suppose this firm produces 15 units of output. What is the variable cost of producing this level of output? What is the firm’s AVC of production when it produces 15 units of output. Explain your answer fully.arrow_forward
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