Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9, Problem 1.3P
To determine
The total revenue, total cost and fixed cost.
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In tourist towns such as Myrtle Beach, some businesses stay open year round while others close.
How do fixed and variable costs affect their decision to close or stay open? (Review "The Shutdown Point" chapter 8).
Write your response below.
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For cases, A through F in the following table, would you (1) operate or shut down in the short run and (2) expand your plant or exit the industry in the long run?
A B C D E F
Total revenue 1,000 2,500 4,000 7,500 7,500 7,500
Total cost 1,400 1,500 5,500 7,000 7,500 8,000
Total fixed cost 300 1,000 500 2,500 2,500 2,500
Matthew Rafferty produces hiking boots in the perfectly competitive hiking boot market. The table contains information on Rafferty's total costs. Fill in the missing values for AFC, AVC, ATC, and MC in the table.
(Enter your responses rounded to two decimal places.)
Output per
Week
0
1
2
3
4
5
6
7
8
9
10
Total Cost
$400.00
500.00
580.00
640.00
705.00
775.00
850.00
960.00
1080.00
1215.00
1400.00
AFC
$
AVC
$
BE
172
ATC
$
IND
MC
$
Chapter 9 Solutions
Principles of Economics (12th Edition)
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- QUESTION 17 Use the following table and use your previous calculations: find the quantity where ATC is at a minimum and find the quantity that is the most efficient operating point for the firm. Total Output Total Cost TFC TVC AFC AVC ATC MC 0 $20 10 $40 20 $60 30 $90 40 $120 50 $180 60 $280 a. MC = ATC between 30 and 40 Quantity ATC at minimum between 20 and 40 Quantity b. MC = ATC at 30 Quantity ATC at minimum between 20 and 40 Quantity c. MC = ATC at 40 Quantity ATC at minimum between 20 and 40 Quantity d. MC = ATC between 30 and 40 Quantity ATC at minimum between30 and 40 Quantity e. MC = ATC between 20 and 40 Quantity ATC at minimum between 20 and 40 Quantityarrow_forwardUnder what conditions will a firm shut down temporarily? Explain theoretically and graphically.arrow_forwardMatthew Rafferty produces hiking boots in the perfectly competitive hiking boot market. The table contains information on Rafferty's total costs. Fill in the missing values for AFC, AVC, ATC, and MC in the table. (Enter your responses rounded to two decimal places.) Output per Week 0 1 2 3 4 6 7 8 9 10 Total Cost $245.00 345.00 395.00 435.00 485.00 545.00 615.00 700.00 800.00 920.00 1065.00 AFC AVC ATC MCarrow_forward
- Question #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify your answer using the shut-downrule (relating price and average variable cost)!arrow_forwardUse the following table and use your previous calculations: find the quantity where ATC is at a minimum and find the quantity that is the most efficient operating point for the firm. Total Output Total Cost TFC TVC AFC AVC ATC MC 0 $20 10 $40 20 $60 30 $90 40 $120 50 $180 60 $280 a. MC = ATC between 30 and 40 Quantity ATC at minimum between 20 and 40 Quantity b. MC = ATC at 30 Quantity ATC at minimum between 20 and 40 Quantity c. MC = ATC at 40 Quantity ATC at minimum between 20 and 40 Quantity d. MC = ATC between 30 and 40 Quantity ATC at minimum between30 and 40 Quantity e. MC = ATC between 20 and 40 Quantity ATC at minimum between 20 and 40 Quantityarrow_forwardAssume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $60.00 $45.00 $105.00 $45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 Instructions: If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Select "Not applicable" and enter a value of "0" for output if the firm does not produce. a. At a product price of $56.00 (i) Will this firm produce in the short run? (Click to select) No Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? (Click to select) Not applicable Loss-minimizing…arrow_forward
- Assume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $ 60.00 $ 45.00 $ 105.00 $ 45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 a. At a product price of $56.00 (i) Will this firm produce in the short run? yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? profit- maximizing output = 9 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 16 b. At a product price of $41.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the…arrow_forwardCould I have help finding the long run TC, AC, and MC?arrow_forwardIf Hasan runs the restaurant himself and before setting up this business, he was working in a company as a salesman for $15,000 per year. Hasan owns the building that his restaurant in housed in and could have rented it out for $10,000 per year. Those would be an implicit cost of opening his own restaurant. Calculate the economic profit?arrow_forward
- The data in the table below are the monthly average variable costs (AVC), average total costs (ATC), and marginal costs (MC) for Alpacky, a typical alpaca wool-manufacturing firm in Peru. The alpaca wool industry is competitive. Output (units of wool) 0 1 2 3 4 5 6 AVC Market Price a. $22.00 b. $18.00 c. $16.00 20.00 17.00 16.70 17.00 18.00 22.33 ATC Qmax - 30.00 22.00 20.00 19.50 20.00 24.00 MC ($) For each market price given below, give the profit-maximizing output quantity and state whether Alpacky's profits are positive, negative, or zero. Also state whether Alpacky should produce or shut down in the short run. 20.00 14.00 16.00 18.00 22.00 44.00 Profit (Click to select) (Click to select) (Click to select) ✓ Produce in Short Run (Click to select) ✓ (Click to select) (Click to select) ✓arrow_forwardBased on the table above which shows Chip's costs, if Chip shuts down in the short run, his average variable costs will bearrow_forwardThe following cost data is for a firm which is selling in a perfectly competitive market: Average fixed Average variable Average total Total Marginal cost S17 product cost S100.00 50.00 33.33 25.00 20.00 cost $17.00 cost $117.00 66.00 47.33 39.25 34.00 2 16.00 15 3 4 15.00 14.25 14.00 14.00 15.71 17.50 13 12 13 16.67 14.29 12.50 11.11 10.00 9.09 7.33 30.67 30.00 14 26 30 35 7 8. 9. 10 11 30.00 30.55 31.60 33.09 35.00 19.44 21.60 41 24.00 48 12 26.67 56 Refer to the data above. If there were 600 identical firms in this industry and total or market demand is as shown below, equilibrium price will be: Quantity demanded 3,000 6,000 9,000 11,000 14,000 19,500 Price $50 42 36 32 20 13 $36arrow_forward
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