Question 12 Plant costs (This table shows total costs at different output levels

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Question 12

Plant costs

(This table shows total costs at different output levels for a given plant.)

Output (units per day)        0         10         20        30        40

Total costs ($ per day)       30        55       78       100      150

Refer to the table above, total variable cost:

is equal to $48 at an output of 20 units.

is the greatest at an output of 40 units.

increases as output increases.

All of the above.

Question 16

Arthur's Garage operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, Average Total Cost (AC) = $20, Average Variable Cost (AVC) = $15, and the price per unit is $10. In this situation,

Arthur 's Garage will shut down immediately.

the market price will fall in the long run.

Arthur 's supply curve will shift to the left.

Arthur 's Garage will lose money in the short run, but stay in business.

Arthur 's Garage will break even.

Question 17

A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output.

Fill in Multiple Blanks

The firm  (enter is or is not) using the cost-minimizing combination of capital and labor.

The firm could produce the same level of output at a lower cost by using  (enter less or more) capital and  (enter less or more) labor.

Question 28

The figure above shows the marginal cost (MC), average total cost (ATC), average variable cost (AVC), average revenue (AR) and marginal revenue (MR) curves for a perfectly competitive firm. The firm is currently producing 80 units of output. To maximize profits (or minimize losses) the firm should:

not change its output level because profits are maximized (or losses are minimized) at 80 units.

raise its price and raise output.

raise its price and hold output constant.

increase output to 180 units.

increase output to 140 units.

The difference between price and average total cost is:

total economic profit (or loss).

fixed cost.

average variable cost.

a tax write-off.

the profit (or loss) per unit of output.

is equal to $48 at an output of 20 units.

is the greatest at an output of 40 units.

increases as output increases.

All of the above.

Figure 7-3 Price ATC MC $16-_ 13 $10 AVC D = AR = MR 0 80 100 140 180 Output

Explanation / Answer

Answer.)

Q12.) is equal to $48 at an output of 20 units.

Note that at zero output Total cost is $30 which would be fixed cost and total cost at output 20 is $78 therefore varibale cost at output 20 is = $78 - $30 = $48

Q16.)  Arthur 's Garage will shut down immediately.

Since price is lower than AVC therefore there is no point in continuing business.

Q17.)  

The firm ( is not) using the cost-minimizing combination of capital and labor.

The firm could produce the same level of output at a lower cost by using ( less ) capital and ( more) labor.

Q28.)

Part A.) increase output to 140 units.

For profit maximization, firm should equate its marginal cost to its marginal revenue curve which is exactly the case at output 140 units.

Part B.) the profit (or loss) per unit of output.

Since ATC shows per unit cost of output therefor the differece between price and ATC would also be the profit (or loss) per unit of output.

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