Question 1

Diesel Dan is a contract truck driver.While his revenue is $1.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)= e^S^-^(60/4).To maximize his profit, Dan should drive

Accepted Answer

The answer of Diesel Dan is a contract truck driver.While...

Question 2

Diesel Dan is a contract truck driver.While his revenue is $2 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)=e^S^-^(60/5).To maximize his profit, Dan should drive

Accepted Answer

The answer of Diesel Dan is a contract truck driver.While...

Question 3

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

Accepted Answer

Given the market price of $21, the firm will produce up to the point where the marginal cost equals the market price. Since the marginal cost for the first 400 units is $20, which is less than the market price, the firm will produce 400 units. Beyond 400 units, the marginal cost increases to $30, which is above the market price, making it unprofitable to produce more. Therefore, the firm will produce exactly 400 units to maximize profits.

Question 4

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

Accepted Answer

Since the price elasticity of demand is greater than 1, a decrease in price would lead to an increase in total revenue, resulting in higher profits for the seller.

Question 5

If the short-run marginal costs of producing a good are $40 for the first 200 units and $50 for each additional unit beyond 200, then in the short run, if the market price of output is $46, a profit-maximizing firm will

Accepted Answer

In the short run, a profit-maximizing firm will produce up to the point where marginal cost equals the market price. Since the marginal cost is $40 for the first 200 units and $50 for each additional unit, the firm will produce exactly 200 units because the market price of $46 is between these two marginal costs.

Question 6

Philip owns and operates a gas station.Philip works 40 hours a week managing the station but doesn't draw a salary.He could earn $700 a week doing the same work for Terrance.The station owes the bank $100,000 and Philip has invested $100,000 of his own money.If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $400 per week, the business's economic profits are

Accepted Answer

Economic profit accounts for opportunity costs. Philip's opportunity cost is the $700 he could earn elsewhere. Accounting profit is $1,000, but subtracting the $700 opportunity cost and $400 interest, the economic profit is -$100 per week.

Question 7

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S)=e^S^-^(60/5).To maximize his profit, Dan should drive

Accepted Answer

The answer of Diesel Dan is a contract truck driver.While...

Question 8

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.80.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

Accepted Answer

With a price elasticity of demand greater than 1, reducing prices would increase total revenue, as the percentage increase in quantity demanded would be greater than the percentage decrease in price. Since pet rocks have a marginal cost of zero, increasing sales volume by lowering prices would maximize profits.

Question 9

Philip owns and operates a gas station.Philip works 40 hours a week managing the station but doesn't draw a salary.He could earn $600 a week doing the same work for Terrance.The station owes the bank $100,000 and Philip has invested $100,000 of his own money.If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $500 per week, the business's economic profits are

Accepted Answer

Accounting profits only take into account explicit costs (such as interest on bank debt) but not implicit costs (such as the opportunity cost of Philip's time and investment). To calculate economic profits, we need to subtract both explicit and implicit costs from total revenue.

Total revenue = accounting profits + implicit costs
Total revenue = $1,000 + $600 (opportunity cost of Philip's time)
Total revenue = $1,600

Total costs = explicit costs + implicit costs
Total costs = $500 (interest on bank debt) + $600 (opportunity cost of Philip's time)
Total costs = $1,100

Economic profits = total revenue - total costs
Economic profits = $1,600 - $1,100
Economic profits = $500 per week.

Therefore, the business's economic profits are $500 per week.

Question 10

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

Accepted Answer

With a price elasticity of demand of 1.20, a decrease in price will result in an increase in quantity demanded that is proportionally greater than the decrease in price, leading to an overall increase in revenue for the seller. In this case, since the marginal cost of pet rocks is zero, the seller can afford to decrease prices without decreasing profits. Therefore, a profit-maximizing seller would decrease prices.

Question 11

A competitive firm has a production function described as follows."Weekly output is the square root of the minimum of the number of units of capital and the number of units of labor employed per week." Suppose that in the short run this firm must use 16 units of capital but can vary its amount of labor freely.
a.Write down a formula that describes the marginal product of labor in the short run as a function of the amount of labor used.(Be careful at the boundaries.)
b.If the wage is w = $1 and the price of output is p = $4, how much labor will the firm demand in the short run?
c.What if w = $1 and p = $10?
d.Write down an equation for the firm's short-run demand for labor as a function of w and p.

Accepted Answer

The answer of A competitive firm has a production function...

Question 12

Philip owns and operates a gas station.Philip works 40 hours a week managing the station but doesn't draw a salary.He could earn $800 a week doing the same work for Terrance.The station owes the bank $100,000 and Philip has invested $100,000 of his own money.If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $300 per week, the business's economic profits are

Accepted Answer

Economic profit is calculated by subtracting both explicit and implicit costs from total revenue. Philip's implicit cost is the $800 he could earn elsewhere. His explicit costs include the $300 interest. So, economic profit = $1,000 (accounting profit) - $800 (opportunity cost) - $300 (interest) = -$100.

Question 13

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $24, a profit-maximizing firm will

Accepted Answer

The answer of If the short-run marginal costs of producing...

Quiz 18: Profit Maximization-Part A

Diesel Dan is a contract truck driver.While his revenue is $1.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = e^S^-^(60/4).To maximize his profit, Dan should drive

Diesel Dan is a contract truck driver.While his revenue is $2 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =e^S^-^(60/5).To maximize his profit, Dan should drive

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

If the short-run marginal costs of producing a good are $40 for the first 200 units and $50 for each additional unit beyond 200, then in the short run, if the market price of output is $46, a profit-maximizing firm will

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =e^S^-^(60/5).To maximize his profit, Dan should drive

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.80.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $24, a profit-maximizing firm will

Quiz 18: Profit Maximization-Part A

Diesel Dan is a contract truck driver.While his revenue is $1.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = eS - (60/4) .To maximize his profit, Dan should drive

Diesel Dan is a contract truck driver.While his revenue is $2 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =eS - (60/5) .To maximize his profit, Dan should drive

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

If the short-run marginal costs of producing a good are $40 for the first 200 units and $50 for each additional unit beyond 200, then in the short run, if the market price of output is $46, a profit-maximizing firm will

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =eS - (60/5) .To maximize his profit, Dan should drive

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.80.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $24, a profit-maximizing firm will

Diesel Dan is a contract truck driver.While his revenue is $1.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) = e^S^-^(60/4).To maximize his profit, Dan should drive

Diesel Dan is a contract truck driver.While his revenue is $2 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =e^S^-^(60/5).To maximize his profit, Dan should drive

Diesel Dan is a contract truck driver.While his revenue is $2.50 per mile driven, the faster he drives, the greater the risk of a speeding ticket.The cost of driving his truck 1 hour at a speed of S miles per hour is C(S) =e^S^-^(60/5).To maximize his profit, Dan should drive