ECON Homework Answers Ch. 7-8 PDF

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Homework answers on Tophat.com from Chapters 7-8...

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ECON Homework Answers Ch. 7- 8 TOPHAT.COM Chapter 7 -

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The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost. o decreasing; increasing Will a change in fixed costs change total cost? o Yes

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Will a change in fixed costs change total variable cost? o No

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Will a change in fixed costs change average cost? o Yes Will a change in fixed costs change marginal cost? o No

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Marginal cost is the slope of ___________. o the total cost curve With increasing marginal cost, if marginal cost is equal to average cost, average cost at this point must be ______________. o at its minimum point If average product is increasing as the variable input increases, which of the following is true? o Average cost must be decreasing Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is $______________. o 15000 Given the previous question, suppose that we now increase production by one automobile per hour. If the cost of that additional automobile is $18,000, what is the new average? $____________. o 16000 If the cost of that additional automobile is $12,000, what is the new average? $____________. o 14000 In your own words, explain why a firm may face diminishing marginal returns to labor as the amount of labor used increases. o Workers will have less capital to work with if more labor is brought into production and therefore, they may have diminishing marginal returns to labor. Explain in your own words why average product can increase even when the marginal product decreases, as long as marginal product is still above the average product. o As long as marginal product is still above the average product, the marginal product will draw average product towards itself, and therefore average product can still rise when marginal product decreases. The

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average product is rising if marginal product is larger than average product. How will an improvement in technology change total product, average product, marginal product, total cost, average cost, and marginal cost in the short run? o As the improved tech is demanded, there will be an increase in all costs in the short run. How will an increase in the rent a business pays affect total product, average product, marginal product, total cost, average cost, and marginal cost in the short run? o Product decreases with marginal product costs and other similar aspects in the short run when rent increases. How will an increase in the wage a business pays affect total product, average product, marginal product, total cost, average cost, and marginal cost in the short run? o they will produce less on average and in total, which will affect the marginal product and have prices larger in the short run if a business pays more Match the input to its correct category. o Cow = Land o Robotic drill press = Capital o Computer software = Capital o Lawyer = Labor o Fresh water = Land o Tractor trailer = Capital Which of the following most likely represents a short-run business decision? o Aaron hires two additional workers to help cover the holiday rush at his shop. In the table below, what is the marginal product of the third worker? o 55 units Which of the following is a cause of diminishing marginal productivity? o In the short run, labor runs out of available capital as more labor gets added to the production process. The production of 75 sofas per week requires 15 workers. The average product of each worker is ______________ sofas per week. o 5 If the average product of labor is 12 units of output per worker per day when eight workers are hired, eight workers will be able to produce ______________ units per day. o 96 Currently, the marginal product of labor is 32 units per week. The average product of labor at the current level of output is 48 units per week. If the employer hires one more worker, the marginal product of labor will be 30 units per week. The average product of labor will ______________. o Fall

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Fill in the missing value for A from the table below. o 80 Fill in the missing value for B from the table below.

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Fill in the missing value for C from the table below. o 70

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If the fixed cost of producing 50 units of output is $100,000 per year, the fixed cost of producing 100 units of output per year is _____. o $100,000 In a model with only labor and capital as inputs, in the short run the amount of ______________ is fixed, while in the long run the amount of ______________ is variable. o either labor or capital; both labor and capital

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Santa Claus’s only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa’s total weekly variable cost if he hires 200 elves? o 40,000 candy canes Variable cost ______________ while fixed cost ______________ as output ______________ in the short run. o rises; stays the same; increases At 600 units of output, total fixed cost is equal to $1,000 and total variable cost is equal to $12,000. Total cost is equal to _______. o $13,000 At 2,000 units of output, the variable cost of production is $12,500 per week. Total cost of producing 2,000 units per week is $45,500. The fixed cost of producing 2,000 units of output per week is equal to ______. o $33,000 Using the table below, calculate the marginal cost of the 4th, 6th, 8th units of output o A=90 o B=110 o C=125 Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is _____. o $3.00 Using the information from the table below, what is the marginal product of the 4th worker? o 45.00 office chairs Using the information from the table above, if the monthly wage of an office chair factory worker is $2,160, what is the marginal cost of increasing output from 190 office chairs per month to 235 office chairs per month? o $48.00

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The fixed cost of producing surfboards is $5,000 per month. The variable cost for producing 15 surfboards is $36,000 per month. The average cost of producing 15 surfboards in a month is ______. o $2,733.33

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Using the table below, calculate the average cost of producing 80, 120, and 160 computers per month. o A = 197.50 o B = 150.00 o C = 128.13 Using the table below, calculate the marginal cost of producing 80, 120, and 160 computers per month. o X = 45.00 o Y= 55.00 o Z = 62.50

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Samantha is evaluating whether to increase production at her book bindery. If she hires one more worker, she can increase output by 50 books per week. A book binder’s weekly wage is $250. Samantha’s marginal cost of increasing output by 50 books per week is ________. o $5.00

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Using the information in the question above, if Samantha’s average cost to bind books is $2.50 before hiring the additional book binder, her average cost to bind books will ______________ if she hires the additional worker. o Increase When a firm earns zero economic profits, it does which of the following? o Has a positive accounting profit

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For a firm, the short-run is defined as being __________. o a period of time in which at least one of the firm's inputs is unchangeable

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What is true about the long-run for a firm? o All inputs can be changed Which of the following is an example of a short-run decision for a firm? o Reducing the number of workers at the firm

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Which of the following is an example of long-run decision for a firm? o A car manufacturer builds a new factory The amount of time a firm operates with the ability to make long-run decisions is how long? o Differs by industry The marginal product of labor (MPL) can be defined as which of the following? o The change in output level as the result of hiring another worker In the short run, the law of diminishing marginal product is the cause of _________. o none of the above Assume an additional waiter can increase the number of customers served in a restaurant by 100 customers per day. The waiter will cost the restaurant $50 per

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day. On the other hand, a new microwave oven will speed the cooking process and allow each customer to be served more quickly. The microwave will allow 200 more customers to be served with no additional labor. The oven can be rented for $75 per day. What should the restaurant do? o Rent a microwave, because the increase in output per dollar spent is greater than the increase in output per dollar spent from hiring another worker The marginal product of labor is 100 boxes of software and wages are $10 per hour. A machine that does the same work rents for $200 per hour and packages 1000 boxes per hour. If the firm is currently producing the amount it wishes, what should it do? o Expand labor and reduce capital, as the additional output for each dollar spent is greater for labor than for capital Regarding input choices, which most fully describes how would a firm respond to an increase in the wage rate in the long run? o The firm would use less labor and more capital. For the next three questions, the following abbreviations are used. MPL = marginal product of labor. MPK = marginal product of capital. W = wage rate (the cost of a unit of labor). R = rental rate (the cost of a unit of capital). Assume a firm is operating in the long-run. At the current level of output, MPL = 30 and MPK = 50. Also assume that in this industry, W = 5 and R = 10. Keeping output the same, how can this firm lower production costs? o Use more L and less K Assume a firm is operating in the long-run. At the current level of output, MPL =10 and MPK = 30. Also assume that in this industry, W = 10 and R = 10. Keeping output the same, how can this firm lower production costs? o Use more K and less L

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Assume a firm is operating in the long-run. At the current level of output, MPL = 60 and MPK = 600. Also assume that in this industry, W = 20 and R = 200. Keeping output the same, how can this firm lower production costs? o The firm is already using the optimal cost-minimizing combination of inputs for this level of output.

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For any firm, what is the long-run average cost curve? o A function which shows the lowest average cost of producing any output level A firm's long-run total cost curve is ________. o upward sloping

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As a firm increases output, long-run average costs typically _________. o fall, hit a minimum, then rise

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Which of the following is NOT one of the reasons a firm might be expected to experience economies of scale? o Reducing issues with diminishing marginal product of labor An electric power plant most likely experiences which of the following? o Economies of scale

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When a firm gets so large that coordination and management of workers and other inputs becomes costly and difficult, it is experiencing which of the following? o Diseconomies of scale

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When a firm is experiencing economies of scale, the long-run average cost curve is _________. o downward sloping

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When can diseconomies of scale occur? o In the long-run If the long-run average cost curve is horizontal, it implies that the firm is experiencing _________. o constant returns to scale

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At a bakery, which of the following operating characteristics might result in economies of scale? o A giant mixing container costs twice as much to operate as a small one but can mix 6 times as much dough daily. Suppose a firm doubles its inputs (therefore doubling its total costs as well). If this firm is experiencing diseconomies of scale, then __________. o output will increase, but less than double Suppose that the cost of all inputs (both labor and capital) decreases. What will happen to the long-run cost curve? The curve will _____, illustrating that _______. o shift downward; any level of output can now be produced at a lower average cost Consider the table below showing different average costs for three different firm sizes across a range of output levels. At a long-run chosen output level of 400, which firm size (amount of capital) would the firm want to use? o K=2 See the table below. At a long-run chosen output level of 500, which firm size (amount of capital) would the firm want to use? o K=3 See the table below. Suppose the firm has firm size K = 1. If the firm was attempting to minimize average costs with this level of capital, what output level would they choose? o 200 See the table below. At what long-run output levels would it be best to choose firm size K = 2? o Output levels between 300 and 400 See the table below. Suppose the firm chooses a permanent output level of 500 units but remains in firm size K = 2. What is the result of this? o The firm will be operating inefficiently at higher costs, therefore not maximizing profits....