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If you segment the market by gender, what price should you charge women? What price should you charge men?
Given this information, how big (in percentage terms) should the senior citizen discount be? Were your results in part (b) surprising? Explain them intuitively.
What price should the golf course set for individual rounds of golf? Why? What price and minimum quantity should it establish for the discounted plan?
Why would a textbook publisher go to the trouble to produce two versions of the same text?
Explain, using your knowledge of block pricing, why the owner's strategy of reducing prices as sales increase might actually lead to increased profit for bar.
A Toyota Camry costs $19,600 and has an average gas mileage of 27 mpg. How many miles do you have to drive before the two cars have the same total cost?
What is Jenny's opportunity cost of starting the business? If Jenny can make an accounting profit of $50,000 a year selling the organic groceries.
Write the cost-minimization problem as a Lagrangian. How will total cost change if the firm produces an additional unit of output?
Define opportunity cost. How does a firm's opportunity cost relate to its economic cost? What is the sunk cost fallacy?
Describe the relationship between fixed, variable and total costs. Why is a fixed cost curve horizontal? Why does a variable cost curve have a positive slope?
Why is a firm's short-run total cost greater than its long-run total cost? Explain why this is also true for a firm's short-run and long-run average costs.
Describe the conditions under which a firm has economies of scale, diseconomies of scale, and constant economies of scale.
It is possible for accounting and economic costs to be equal. It is possible for a firm to show an economic profit without showing an accounting profit.
Suppose that Congress imposes a 39-cent excise tax on each children's wooden practice arrow DMA sells. Illustrate the effects of tax on the cost curves of DMA.
What is the total cost of producing q units of output? What is the average cost of producing q units of output?
How does a firm's short-run ATC curve differ from its long-run ATC curve? Explain your answer.
Digging trenches requires two types of labor: unskilled labor (aka workers) and skilled labor. Why is K&B Construction Company minimizing its costs?
A builder of custom motorcycles has a choice of operating out of one garage or two. What does this firm's LATC look like? Can you describe it as a function?
Perfectly competitive firms earn zero economic profits in the long run. How can a firm earn zero economic profits and still yield positive economic rents?
What is a perfectly competitive firm's short-run supply curve? How do we use firms' short-run supply curves to create the industry short-run supply curve?
A firm operating at a loss will decide whether to shut down based on the relationship. Why does a firm ignore its fixed cost when making this decision?
Using these three criteria, describe a perfectly competitive industry. Why does a perfectly competitive firm face a horizontal demand curve?
Suppose that a firm has following Cobb?- Douglas production function. What must its long-run total cost curve look like? Its long-run average total cost curve?
What is the short-run production function? What is the short-run demand for labor? What are the firm's short-run total cost and short-run marginal cost?
What are the long-run demands for capital and labor? Derive total cost, average cost, and marginal cost in the long run.