Question 1

Use the graph below to show the firm's short-run supply curve of a perfectly competitive firm.

Accepted Answer

The answer of Use the graph below to show the...

Question 2

If marginal costs are constant what will the average variable cost curve look like? What about the average total cost curve?

Accepted Answer

The answer of If marginal costs are constant what will...

Question 3

How is a long-run average cost curve different from a short-run average cost curve? How are they related?

Accepted Answer

The answer of How is a long-run average cost curve...

Question 4

What is meant by decreasing returns to scale?

Accepted Answer

The answer of What is meant by decreasing returns to...

Question 5

The table below shows the monthly output and total monthly cost of widgets for three firms in the widget industry. Given the information in the table, can we draw any conclusions about the returns to scale in the widget industry? If so, what does the information suggest about the shape of the long-run average cost curve?

Accepted Answer

The answer of The table below shows the monthly output...

Question 6

Books.com is earning a total revenue of $200,000 per year. Its annual total fixed costs are $50,000 and its annual total variable costs are $75,000. What is the operating profit for Books.com? What is economic profit?

Accepted Answer

The answer of Books.com is earning a total revenue of...

Question 7

Are the short-run and long-run average cost curves U-shaped for the same reason? Explain.

Accepted Answer

The answer of Are the short-run and long-run average cost...

Question 8

A railroad company lays a line of track between Houston and Dallas. It provides daily service for industrial customers and ships 5,000 ton-miles per day with a single train and only one departure and arrival at each end. It has an opportunity to purchase a second train that would allow it to ship twice the amount of ton-miles per day. Does this firm face increasing, constant or decreasing returns to scale? Explain.

Accepted Answer

The answer of A railroad company lays a line of...

Question 9

Comdex Computer Company is producing at a price of $10 with an average total cost of $12 and a fixed cost of $300. The firm is currently producing 100 units. What are the operating profits of this firm? What are the economic profits of this firm?

Accepted Answer

The answer of Comdex Computer Company is producing at a...

Question 10

Using the two graphs below determine the number of firms that are operating in this industry.

Accepted Answer

The answer of Using the two graphs below determine the...

Question 11

Assume there are three firms in an industry as depicted in the graphs below. Based on this information construct the industry supply curve.

Accepted Answer

The answer of Assume there are three firms in an...

Question 12

Flowers.com is earning a total revenue of $100,000 per year. Its annual total fixed costs are
$25,000 and its annual total variable costs are $75,000. What is the operating profit for Flowers.com? What is economic profit?

Accepted Answer

The answer of Flowers.com is earning a total revenue of...

Question 13

What is meant by increasing returns to scale?

Accepted Answer

The answer of What is meant by increasing returns to...

Question 14

Critically evaluate the following statement. "Short-run costs curves must be downward-sloping because after all labor is increasingly more productive."

Accepted Answer

The answer of Critically evaluate the following statement. "Short-run costs...

Question 15

How do constant returns to scale affect the shape of the long-run average cost curve?

Accepted Answer

The answer of How do constant returns to scale affect...

Question 16

How do increasing returns to scale affect the shape of the long-run average cost curve?

Accepted Answer

The answer of How do increasing returns to scale affect...

Question 17

What is meant by constant returns to scale?

Accepted Answer

The answer of What is meant by constant returns to...

Question 18

How do decreasing returns to scale affect the shape of the long-run average cost curve?

Accepted Answer

The answer of How do decreasing returns to scale affect...

Question 19

Music.com is earning a total revenue of $100,000 per year. Its annual total fixed costs are $50,000 and its annual total variable costs are $175,000. What is the operating profit for Music.com? What is economic profit? Is this firm doing the right thing by continuing to produce in the short run? If conditions don't change what should this firm do in the long run?

Accepted Answer

The answer of Music.com is earning a total revenue of...

Question 20

If revenue in the short run is less than variable costs, what should the firm do??

Accepted Answer

The answer of If revenue in the short run is...

Quiz 9: Long-Run Costs and Output Decisions