# Chap 6 and 7 Econ Homework

Cassie produces and sells 400 jars of homemade jelly each month for $3 each. Each month, she pays$200 for jars, $150 for ingredients, and uses her own time, with an opportunity cost of$300. Her economic profits each month are

$550 Assume Brad worked as a contractor for a year and had revenues of$120,000 and explicit cost of $70,000. If he could have been paid$80,000 working for a computer company, his:

economic profit equaled -$30,000 and he would be rational to stop working as a contractor. An economic profit of zero implies -normal profit. -the firm is covering both explicit and implicit costs. - the firm's revenues are sufficient to compensate the money and time that the owners put into the business. A firm can produce 840 gallons of paint per day with 6 workers, or 910 gallons per day with 7 workers. The marginal product of labor over this range of output, stated in gallons per worker per day, is 70 In the table below, diminishing marginal product is first evident with the addition of the ____ worker. 6 Don Keene promotes boxing matches. He makes$6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight?

the marginal cost of promoting one additional boxing match

f average total cost equals $15 at 20 units of output and average total cost equals$15 at 21 units of output, then the marginal cost of the 21st unit is ____

$15 A firm's total fixed cost equals$2,500. The firm's average fixed cost at 1, 5, and 10 units of output, respectively, will be:

$2,500,$500, and $250 Which of the following must be true if the short-run average total cost curve is declining? Marginal cost is less than average total cost. Luke realizes that his space taxi service is operating in the region of diminishing marginal product. As he provides more taxi service in the short run, what will happen to the marginal cost of providing the additional service? Marginal cost will increase If the total cost of producing 10 units equals$90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced is less than the average total cost of producing ten units When economies of scale exist, a decrease in the level of output will lead to an increase in cost per unit What will pull up/down the average total cost and average variable cost curve? Marginal cost curve Which of the following is true about perfect competition? -Since a perfectly competitive seller can sell all he wants at the market price, her demand curve is horizontal at the market price over the entire range of output that she could possibly produce. -Because perfectly competitive markets have many buyers an A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that: maximizes the amount by which total revenue exceeds total cost A firm sells grapefruit in a perfectly competitive market at a price of$1.50 per pound. The firm's marginal revenue

equals \$1.50

If a perfectly competitive firm's marginal revenue was less than its marginal cost

it would contract its output but not raise its price in order to increase its profits

Which of the following is true of perfectly competitive firms?

For a perfectly competitive firm, as long as the price derived from expanded output exceeds the marginal cost of that output, the expansion of output creates additional economic profits

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost. In this instance, a profit-maximizing firm should:

continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.

When the demand curve is horizontal (straight line) the firm can be classified as

-A price taker
-very small relative to market output as a whole
-producing a homogeneous product

When market price falls below AVC (average variable cost) the firm should:

Shut down. Because they cannot cover their variable costs or fixed costs.

To maximize profits, a firm should produce the output at the point where:

MC(Marginal Cost)=MR(Marginal Revenue)

When price is more than average variable cost, but less then average total cost, the firm should:

keep operating in the short run in order to minimize losses, since price exceeds average variable cost