Chapters 22-24 EconLab 4

question

The short-run production function for a manufacturer of portable power banks is shown at the right. Based on this information, calculate the marginal product at each quantity of labor.

answer

0 0
1 20 20 (20-0)
2 55 35 (55-20)
3 80 25 (80-55)
4 100 20 (100-80)
5 110 10 (110-100)
6 115 5 (115-110)

question

In the short run, if a firm continues to add workers, marginal product must begin to diminish because

answer

each worker has less capital to work with.

question

The following table shows the relationship between workers and output for a small factory in the short run, with capital held constant. Find the marginal product of labor
(MPL).

For this firm, diminishing marginal returns set in after worker ____
is employed.

answer

0 0
1 40 40 (40-0)
2 88 48 (88-40)
3 141 53 (141-88)
4 183 42 (183-141)
5 201 18 (201-183)

3

question

In the table above, diminishing returns begins with the addition of worker number ____

In the table above, the marginal product becomes negative when the
____th worker is added

answer

4

6th

question

The cost structure of a manufacturer of microchips is described in the table shown below.

The firm's fixed costs equal $15,000 per day. Calculate the average variable cost, average fixed cost, and average total cost at each output level.

answer

AVC: total cost of output - 15,000 / output
AFC: 15,000 / output
ATC: total cost of output / output

question

The long-run average cost curve

answer

represents the various average costs attainable at the planning stage of the firm's decision making.

question

The shape of the short-run cost curves are the result of

answer

the law of diminishing returns.

question

Which of the following is true about the long-run average cost curve?

answer

The long-run average cost curve is the envelope of the firm's short-run average cost curves.

question

On the graph, where do economies of scale exist?

answer

In the range of outputs from A to B.

question

The perfectly competitive firm is said to be a

answer

price taker — it takes the price given by the market.

question

The demand curve for the perfect competitor is horizontal because

answer

the market dictates each firm's price

question

Consider the diagram at right, which applies to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm's current average revenue per unit? $__.

What are the present economic profits of this firm? $__.

Is the firm maximizing economic profits?

If the market clearing price drops to $12.50 per unit the firm should

If the market clearing price drops to $7.50 per unit the firm should

answer

$20

$47,500
(20-15.25)= 4.75 x 10,000

Yes, they are producing where the marginal revenue equals the marginal cost.

All of the above

All of the above

question

The decision making process for the perfectly competitive firm boils down to

answer

deciding how much to produce

question

The table below represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in the area is
$10. Total costs include all implicit opportunity costs. Calculate the pizza shop's marginal cost and marginal revenue at each rate of output and fill in the values in the table.

Based on marginal analysis, what is the profit-maximizing rate of output for the pizza shop? _____ pizzas.

answer

MC: change in total cost / change quantity

MR: change in total revenue / change quantity

8

question

Profits are maximized for the perfectly competitive firm when the firm produces the quantity where

answer

All of the above

question

In the figure shown at the right, what is the profit maximizing output and price in the short run?

answer

46, $50

question

Suppose that the market price in a perfectly competitive industry is $50 per unit.
1.) Using the line drawing tool, draw the marginal revenue line given this price and label your line MR.
2.) Using the rectangle drawing tool, draw a rectangle showing the area of profit or loss of the firm and label it P/L.

The firm is operating at an economic ______ in the short run.

answer

MR at 50
Profit/loss at 50-40 MC line

profit

question

Given the cost curves in the diagram, what market situation would you expect to occur?

answer

A natural monopoly

question

The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________.

answer

horizontal, downward sloping

question

For a monopolist, marginal revenue is

Using the line drawing
tool, show a possible marginal revenue curve for this monopolist on the graph to the right. Label it 'MR'.

answer

less than the price of the product.

MR line - (0,9) (5,0)

question

The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks

answer

price x output

0
9.5
18
25.5
32
37.5
42
45.5
48

question

Given the information in the table at right, calculate the dry cleaner's marginal revenue (MR) and marginal cost (MC) at each output level.

Based on marginal analysis, what is the profit-maximizing level of output? ___ units.

answer

3, 11.5
2.5, 10.5
2, 9.5
1, 8.5
2, 7.5
6.5, 6.5
8, 5.5
4, 4.5

6 units

question

The graph to the right shows demand and marginal revenue curves for a monopoly firm. Complete both steps and then check your answer. Assume the marginal cost is not constant.
1.) Using the line drawing tool, draw a line showing a possible short-run marginal cost curve for this firm. Label this line 'MC'.
2.) Using the point drawing tool, plot the point identifying this firm's profit-maximizing output level and corresponding price to be charged. Label this point 'B'.

answer

MC line upward slope
B (14, 6)

question

Use the graph at right to answer the following questions.

What is the monopolist's profit-maximizing output? ____

At the profit-maximizing output rate, what is the average total cost? $___

At the profit-maximizing output rate, what is the average revenue? $___

At the profit-maximizing output rate, what is the monopolist's total cost? $___

At the profit-maximizing output rate, what is the monopolist's total revenue? $___

What is the maximum profit? $___

answer

5000

$5.25

$6

$26,250

$30,000

$3,750

1 of 24

question

The short-run production function for a manufacturer of portable power banks is shown at the right. Based on this information, calculate the marginal product at each quantity of labor.

answer

0 0
1 20 20 (20-0)
2 55 35 (55-20)
3 80 25 (80-55)
4 100 20 (100-80)
5 110 10 (110-100)
6 115 5 (115-110)

question

In the short run, if a firm continues to add workers, marginal product must begin to diminish because

answer

each worker has less capital to work with.

question

answer

0 0
1 40 40 (40-0)
2 88 48 (88-40)
3 141 53 (141-88)
4 183 42 (183-141)
5 201 18 (201-183)

3

question

In the table above, diminishing returns begins with the addition of worker number ____

In the table above, the marginal product becomes negative when the
____th worker is added

answer

4

6th

question

answer

AVC: total cost of output - 15,000 / output
AFC: 15,000 / output
ATC: total cost of output / output

question

The long-run average cost curve

answer

represents the various average costs attainable at the planning stage of the firm's decision making.

question

The shape of the short-run cost curves are the result of

answer

the law of diminishing returns.

question

Which of the following is true about the long-run average cost curve?

answer

The long-run average cost curve is the envelope of the firm's short-run average cost curves.

question

On the graph, where do economies of scale exist?

answer

In the range of outputs from A to B.

question

The perfectly competitive firm is said to be a

answer

price taker — it takes the price given by the market.

question

The demand curve for the perfect competitor is horizontal because

answer

the market dictates each firm's price

question

answer

$20

$47,500
(20-15.25)= 4.75 x 10,000

Yes, they are producing where the marginal revenue equals the marginal cost.

All of the above

All of the above

question

The decision making process for the perfectly competitive firm boils down to

answer

deciding how much to produce

question

answer

MC: change in total cost / change quantity

MR: change in total revenue / change quantity

8

question

Profits are maximized for the perfectly competitive firm when the firm produces the quantity where

answer

All of the above

question

In the figure shown at the right, what is the profit maximizing output and price in the short run?

answer

46, $50

question

answer

MR at 50
Profit/loss at 50-40 MC line

profit

question

Given the cost curves in the diagram, what market situation would you expect to occur?

answer

A natural monopoly

question

The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________.

answer

horizontal, downward sloping

question

For a monopolist, marginal revenue is

Using the line drawing
tool, show a possible marginal revenue curve for this monopolist on the graph to the right. Label it 'MR'.

answer

less than the price of the product.

MR line - (0,9) (5,0)

question

The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks

answer

price x output

0
9.5
18
25.5
32
37.5
42
45.5
48

question

answer

3, 11.5
2.5, 10.5
2, 9.5
1, 8.5
2, 7.5
6.5, 6.5
8, 5.5
4, 4.5

6 units

question

answer

MC line upward slope
B (14, 6)

question

answer

5000

$5.25

$6

$26,250

$30,000

$3,750

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Chapters 22-24 EconLab 4

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