Tiny Macroeconomic HW

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Signature Date

Number of workers Units of output

0 0 1 25 2 55 3 95 4 125 5 150

Table 8.2

Refer to Table 8.2, which gives a firm’s production function. Assume that all non labor inputs are fixed. Diminishing returns set in with the addition of the:

−

A. sixth worker. B. third worker. C. fourth worker. D. fifth worker.

In the short run, the marginal cost of the first unit of output is $20, the marginal cost of producing the second unit of output is $16, and the marginal cost of producing the third unit of output is $12. The firm’s total variable cost of producing three units of output is:

A. $12. B. $20. C. $48. D. $16.

In the short run, the marginal cost of the first unit of output is $40, the average variable cost of producing three units of output is $32, and the marginal cost of producing the second unit of output is $32. What is the marginal cost of producing the third unit of output?

A. $40 B. $32 C. $96 D. $24

Student:__________________________________________ I.D: _____________________

CRN: _____________________ Course: MICROECONOMICS

(3 marks)

(3 marks)

(3 marks)

Assignment 3 ———– / 40

4.

5.

Figure 8.2 presents a firm’s marginal, average total, average fixed, and average variable cost curves. The firm faces fixed costs of:

A. $130. B. $20. C. $4000. D. $110.

Figure 8.3 shows a firm’s marginal cost, average total cost, and average variable cost curves. At Q=50, the total cost is:

A. $2,100. B. $2,800. C. $4,500. D. $6,300.

(2 marks)

(2 marks)

6.

7.

8.

The explicit and implicit costs for Reliance Publishing are shown below:

Cost Wages paid to employees $ ,000114 Funds spent on equipment $ ,000110

Raw materials $ ,00053 Wages foregone in another job $ ,000106

The explicit costs for Reliance Publishing are $ . (Enter your response as a whole number.)

The accounting cost for Reliance is

A. $ .383,000 B. $ ,000.114 C. $ .277,000 D. $ .224,000

Compute the Cost. Edward the entrepreneur takes 2 hours to cut a lawn and he cuts lawns per year. He uses solar-powered equipment (truck and mower) that will last forever and could be sold at any time for $20,000. Edward could earn $ per hour as a pedicurist. The interest rate is 10 percent.

100 —

16

a. Given his current output level, his marginal cost is $ (enter your response to the nearest dollar) and his average cost is $ (enter your response to the nearest dollar).

b. Suppose he decides to reduce the number of lawns cut by half, to per year. His new marginal cost is $ (enter your response to the nearest dollar) and his new average cost is $ (enter your response to the nearest dollar).

50

Constant Marginal Cost. Consider a firm operating in the long run with an indivisible input that has a cost of $ . The marginal cost of production is constant at $ per unit.

100 3

Use the three-point curved line drawing tool to draw and label the firm’s long-run average-cost curve for 5 to units of output.

12

Carefully follow the instructions above, and only draw the required objects.

The long-run average cost drops from $ for the first unit to $ for the unit. (Enter your responses rounded to the nearest penny.)

twelfth

(2 marks)

(4 marks)

(2 marks)

(2 marks)

(1 mark)

9.

10.

11.

(1) increase decrease

(2) increase decrease

At the current output level, a farmer’s marginal cost of producing sugar is $ . If the price of sugar is $ per pound, the

farmer should (1) production. If the price of sugar is $ per pound, the farmer should

(2) production.

0.29 0.24

0.33

(1) increased decreased

(2) greater than equal to less than

More or Fewer Deliveries? Consider a delivery firm that delivers packages by bicycle, charging $ per package and paying each of its workers $ per hour. One day, one of the workers was hours late to work, and the number of packages delivered that day decreased by .

14 13 two

one package

a. The tardiness of the worker (1) the firm’s profit.

b. Based on the new information provided by the tardy worker, the firm should produce fewer deliveries by reducing its

workforce because the marginal cost is (2) the price.

(1) shut down operate

(2) average total cost price

(3) average variable cost price

(4) exit stay in

(5) price average total cost

(6) average total cost price average variable cost

Your firm has a price of $ , an average total cost of $ , and an average variable cost of $ . In the short run, you should

(1) because (2) exceeds (3) .

10 12 9

In the long run, you should (4) the market because (5) exceeds (6) .

(2 marks)

(2 marks)

(6 marks)

12.

(1) above point c at point d

(2) greater equal to

(3) operating with a profit shutting down or operating at a loss

Operate or Shut Down? Referring to the figure at right, suppose the market price of shirts drops to $ .3.00

At this price, the marginal principle will be satisfied

(1) on the marginal-cost curve.

The price of $ is (2) than AVC, so the

firm will be better off  (3) .

3.00

(2 marks) (2 marks) (2 marks)

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