Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 8, Problem 11PAA
To determine
To explain: Whether CEOwould praise or chastise the manager.
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The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm’s production plans: “In order to maximize profits, it is essential that we operate at the minimum point of our average total cost curve.” If you were the CEO of the automaker, would you praise or chastise the manager? Explain.
Douglas Fur is a small manufacturer of fake-fur boots in San Diego. The following table shows the company’s total cost of production at various production quantities.
On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $210, so you should start your ATC curve by placing a green point at (1, 210). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $90, so you should start your MC curve by placing an orange square at (0.5, 90).)
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
Douglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company’s total cost of production at various production quantities.
On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $155, so you should start your ATC curve by placing a green point at (1, 155). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $95, so you should start your MC curve by placing an orange square at (0.5, 95).)
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- 4. Various measures of cost Douglas Fur is a small manufacturer of fake-fur boots in San Francisco. The following table shows the company's total cost of production at various production quantities. Fill in the remaining cells of the following table. Average Variable Cost (Dollars per pair) Average Total Cost (Dollars per pair) Quantity Total Cost Marginal Cost Fixed Cost Variable Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) 120 1 210 2 270 3 315 4 380 5 475 630arrow_forwardSuppose the imaginary company of Panthera is a small, Cedar Rapids-based American apparel manufacturer specializing in athleisure. The following table presents the brand’s total cost of production at several different quantities. Fill in the remaining cells of the following table. (Graph is in images)arrow_forwardIf you assume that a firm has a U-shaped average cost curve, why would large and small firms have higher costs than middle-sized firms?arrow_forward
- Each graph illustrates three short-run cost curves for firms, where ATC is average total cost (also referred to as average cost), MC is marginal cost, and AVC is average variable cost. Please classify each of the graphs as valid or invalid based on what you know about the relationships between these curves.arrow_forward4. Various measures of cost Suppose the imaginary company of Panthera is a small, Reno-based American apparel manufacturer specializing in athleisure. The following table presents the brand's total cost of production at several different quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost Fixed Cost Variable Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) 0 1 2 3 4 01 5 6 60 160 220 270 340 450 630 000000 Average Variable Cost Average Total Cost (Dollars per pair) (Dollars per pair) On the following graph, plot Douglas Fur's average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $160, so you should start your ATC curve by placing a green point at…arrow_forwardThe cost function of a UC Irvine donut shop is: C(q)=10+ 10q + q?, so the marginal cost function is: MC= 10+ 2q. In these equations, q is the output in terms of boxes of donuts. (a) What is the firm's average cost curve? (Note: just write the equation, no graph necessary) What is the firm's average variable cost curve? (Note: just write the equation, no graph (b) necessary) (c) If the price of a box of donuts is $20, what is the optimal output for this firm?arrow_forward
- Draw an example of the Total Fixed Cost, Total Variable Cost, and Total Cost of a company whose marginal cost is non-linear and increasing for all Q>0. (Please have the quantity (Q) on the horizontal axis and $ on the vertical axis as we had in class. You do not need to provide the functional form or numbers, just the graphs with the appropriate shape.)arrow_forwardIn the theory of the firm, economist consider the total cost to be a function of the output level Q: C=f(Q). According to the definiton of a function, should each cost figure be associated with a unique level of output?arrow_forwardHow would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect the long-run average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?arrow_forward
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