Question 1

Compute the total revenue, total costs, and profits when the price of a crate of grapes is $80. How many crates of grapes will maximize profits? How does the answer compare to the price equals marginal cost condition?

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Question 2

Consider the information in the table below:  Plot the total revenue and total cost curves for this firm. What is the maximum economic profit this firm can earn? How much will the entrepreneur earn when the firm is maximizing profits? Do the slopes of the two curves appear to be the same at the maximum profit level?

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Question 3

What are the two primary inputs in today's production? Which one of these inputs is variable and which one is fixed?

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Question 4

Producer surplus equals total revenues minus total costs.

Accepted Answer

Producer surplus equals the difference between the amount producers are willing to accept for a good or service and the actual amount they receive (market price). Total revenues minus total costs is actually the definition of profit.

Question 5

Explain the difference between profit and producer surplus.

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Question 6

The difference between producer surplus and profits for a single firm is fixed costs.

Accepted Answer

Producer surplus is the difference between the price received by a producer and the minimum price at which the producer is willing to sell a product, which does not take fixed costs into account. Profits, on the other hand, are the revenue earned by a firm after deducting all costs, including fixed costs. Therefore, fixed costs are the difference between producer surplus and profits for a single firm.

Question 7

Which of the following formulas is not a valid characterization of producer surplus?

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Question 8

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

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Question 9

The difference between producer surplus and economic profit is

Accepted Answer

Producer surplus is the difference between the price received by the producer and the marginal cost of production, while economic profit is the total revenue minus both explicit and implicit costs, which include fixed costs. Therefore, the difference between the two concepts is fixed costs (choice D). The other choices are not directly related to the difference between producer surplus and economic profit.

Question 10

Refer to the table below. Find the fixed costs and the producer surplus when the firm produces the profit-maximizing quantity. What is the relationship between producer surplus and fixed costs?

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Question 11

Where does producer surplus get its name? That is, why do economists call it a surplus?

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Question 12

Producer surplus equals profits

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The answer of Producer surplus equals profits
...

Question 13

Profit is usually ____ producer surplus for a firm.

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Question 14

Suppose you are able to babysit at $10 per hour. The only cost to you is the opportunity cost of your time. For the first 2 hours, the opportunity cost of your time is $7 per hour. But after 2 hours, the opportunity cost of your time rises to $13 because of other commitments. Draw the marginal cost to you of babysitting. Draw in the price you receive for babysitting. For how long will you babysit? Calculate your producer surplus.

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Question 15

Name one industry in which firms are price-takers. Name one industry in which firms are not price-takers. Suppose you set up a business where you sell lemonade on a street. Would you be a price-taker or a price-maker?

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Question 16

The table below shows the total costs of producing cherries on a small plot of land.

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The answer of The table below shows the total costs...

Question 17

Producer surplus is just an economist's technical name for profit.

Accepted Answer

Producer surplus is the difference between what producers are willing to accept for a good or service versus what they actually receive, which can include but is not limited to profit. It measures the benefit to producers, part of which may be profit, but it also includes fixed and variable costs.

Question 18

Suppose a price-taking firm has the following total cost schedule:

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Question 19

The table below shows the cost schedule for Walworth Baker.

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The answer of The table below shows the cost schedule...

Quiz 6: The Supply Curve and the Behavior of Firms