Economic: Total Cost

Your cousin Vine owns a painting company with fixed costs of $200 and the schedule for variable costs as below. What is the efficient scale of the painting company? Quantity of Houses Painted per Month Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year Job as an accountant.

If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store?

3. What you give up for taking some action is called the explain the statement. . Fill out the blank and

4. Is falling when marginal cost is below it and rising when marginal cost is above it. Fill out the blank and explain the statement.

5. A cost that does not depend on the quantity produced is a blank and explain the statement. . Fill out the

6. In the ice-cream industry in the long run, includes the cost of cream and sugar but not the cost of factory. Fill out the blank and explain the statement.

7 Profit equal total revenue less . Fill out the blank and explain the statement.

8. The cost of producing an extra unit of output is the

9. A firm has fixed cost of $100 and average variable cost of $SQ, where Q is the number of units produced. What is the efficient scale of this firm?

10. Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. At what price would Bob temporarily shut down his business?

1 1 . Consider total cost and total revenue given in the following table.

At what level of quantity does the marginal cost equal marginal revenue? Quantity Economic: Total Cost By Jointer

12. Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises. What happens to the profits of boat makers in the short run?

13. Suppose that ETC=OHIO+sq, where ETC is total cost and q is the quantity produced. What is the minimum price necessary for this firm to produce any output n the short run?

14. Suppose that ETC=100+sq and MAC=sq.

ETC is total cost, MAC is marginal cost, and q is the quantity produced. The perfectly competitive firm maximizes profits by producing 10 units of output. At what price does it sell these units?

15. A company is considering building a bridge across a river. The bridge would cost $2 million to build and nothing to maintain. The following table shows the company’s anticipated demand over the lifetime of the bridge: Price per crossing Fifth objective f the company is profit minimization, should the company build the bridge?

16. A company is considering building a bridge across a river. The bridge would cost $5 million to build and nothing to maintain. The following table shows the bankable costs 10 1 100 | 200 | 300 14001 70018001 To induce the company to build the bridge, the government is considering subsidy. Is the subsidy necessary? If so, what should be the amount of subsidy?

17. Johnny Rockabilly has Just finished recording his latest CD.

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