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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.
Derive the long-run average and marginal cost curves. How do marginal and average costs change with increases in output? Explain.
What is Josie's marginal revenue from selling another kitten? (Express your answer as an equation.)
For which quantities does Mike's Bicycle Factory exhibit economies of scale? For which quantities does it exhibit diseconomies of scale?
Derive the firm supply curve for ice cream producers with extraordinary operations managers.
What short-run adjustments do you expect competing egg farmers to make as a result of this broadcast? What will happen to the profits of egg farms?
Draw a diagram showing the marginal cost of each unit that Marty produces. If flux capacitors sell for $2, determine the profit-maximizing quantity for Marty.
What is the level of Hack's fixed cost? What is Hack's short-run average variable cost of producing berries? (Express AVC as a function of Q.)
In the short run, how will this fee increase affect Iliana's output level? Her profit? In the long run, how will this fee increase affect Iliana's output le