1. Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earn $200 per acre. Is he currently earning an economic profit? Why or why not?
2. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for labor purchased in the labor market
b) A firm’suse of a warehouse that it owns and could rent to another firm
c) The wages that owners could earn if they did not work for themselves
3. What are economies of scale? Please give an example. What are diseconomies of scale? Please give an example.
4. Your rich relative died and left you $100,000, which you decided to use for your own Internet business. What will be your fixed and variable costs? Briefly discuss.
5. Explain the shape of the long-run average cost curve. How firms use the long-run cost curve to make choices about production?
6. What is the relationship between marginal cost and average cost? Briefly explain.
7. What distinguishes a firm's short run period from its long run priod? Briefly explain.
8. As a farmer, you must decide how many times during the year to plant a new crop. Also, you must decide how far apart to space the plants. Will diminishing returns to be a factor in your decision making? Briefly discuss.
9. How does having a menu that is uniform around the country provide McDonald's with economies of scale? Briefly discuss