Problem Set . Production, Costs, and Industry Structure PDF

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Problem Set . Production, Costs, and Industry Structure...

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1. Explicit costs are out of pocket costs. Implicit costs are costs that represent opportunity cost. 2. I would consider this an explicit cost because it’s an out of pocket expense that goes directly to the lender. 3. For an accounting profit you can only use explicit costs. For an economic profit you can only use implicit costs. 4. A production function is the relationship between the amount of productive factors and the amount of product obtained. 5. A fixed input doesn’t change as the output changes. A variable input can either be increased or decreased within a short period of time. 6. To calculate marginal product divide the change in total product by the change in labor. 7. You would expect a short run curve downwards. 8. The factor payments are rent (land), wages (labor), and interest and dividends (capital). 9. A fixed cost stays the same regardless of production output. A variable cost varies depending on the production output. 10. -

$30 $40 $55 $75 $100 $130 $165

11.

$10 $30 $12.50 $10 $40 $27.50 $15 $15 $17.50 $20 $25 $20 $25 $25 $26 $22.50 $30 $27.50 $35

Fixed costs are straight horizontal lines. Variable costs are u-shaped curves. Marginal costs are j-shaped curves. Average total costs are u-shaped curves. Average variable costs are u-shaped curves. 12. There aren’t fixed costs in the long run. This is because a firm can change all of its outputs by making them vary depending on requirements....