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Economics

David C. Colander

Chapter 11

Production and Cost Analysis I - all with Video Answers

Educators

Chapter Questions

03:50

Problem 1

What costs and revenues do economists include when calculating profit that accountants don't include? Give an example of each. $(L O I I-I)$

Jennifer Stoner
Jennifer Stoner
Numerade Educator
01:49

Problem 2

Peggy-Sue's cookies are the best in the world, or so I hear. She has been offered a job by Cookie Monster. Inc., to come to work at $\$ 125,000$ per year. Currently, she is producing her own cookies, and she has revenues of $\$ 260,000$ per year. Her costs are $\$ 40,000$ for labor, $\$ 10,000$ for rent, $\$ 35,000$ for ingredients, and $\$ 5,000$ for utilities. She has $\$ 100,000$ of her own money invested in the operation, which, if she leaves, can be sold for $\$ 400,000$ that she can invest at 1 percent per year. $(L O 11-1)$
a. Calculate her accounting and economic profits.
b. Advise her as to what she should do.

Breanna Ollech
Breanna Ollech
Numerade Educator
02:39

Problem 3

Economan has been infected by the free enterprise bug. He sets up a firm on extraterrestrial affairs. The rent of the building is $\$ 4,000,$ the cost of the two secretaries is $\$ 40,000,$ and the cost of electricity and gas comes to $\$ 5,000$. There's a great demand for his information, and his total revenue amounts to $\$ 100,000 .$ By working in the firm, though, Economan forfeits the $\$ 50,000$ he could earn by working for the Friendly Space Agency and the $\$ 4,000$ he could have earned as interest had he saved his funds instead of putting them in this business. $(L O I 1-I)$
a. What is his profit or loss by an accountant's definitions?
b. What is his profit or loss by an economist's definitions?

Alejandro Ruiz
Alejandro Ruiz
Numerade Educator
01:58

Problem 4

What distinguishes the short run from the long run? $(L O I 1-2)$

Sujita Thavva
Sujita Thavva
Numerade Educator
05:34

Problem 5

What is the difference between marginal product and average product? $(L O I 1-2)$

Srikar Katta
Srikar Katta
Numerade Educator
02:16

Problem 6

Explain how studying for an exam is subject to the law of diminishing marginal productivity. $(L O 11-2)$

Pragya Ahuja
Pragya Ahuja
Numerade Educator
01:41

Problem 7

Find $T C, A F C, A V C, A C,$ and $M C$ from the following table. $(L O I I-3)$

Dwijendra Rao
Dwijendra Rao
Numerade Educator
01:17

Problem 8

For each of the following indicate what costs are being calculated: $(L O I I-3)$
a. $F C+V C$
b. $T C / Q$
c. $F C / Q$
d. $V C / Q$
e. $A F C+A V C$

Jennifer Stoner
Jennifer Stoner
Numerade Educator
03:44

Problem 9

Classify each of the following as fixed or variable costs: $(L O I 1-3)$
a. Outsourced payroll services.
b. Leased offices.
c. Company-owned building.
d. Payroll taxes.

Tommy Nguyen
Tommy Nguyen
Numerade Educator
02:25

Problem 10

Which of the costs discussed in the chapter is the most important when a firm is deciding how much to produce? $(L O 11-3)$

Srikar Katta
Srikar Katta
Numerade Educator
07:35

Problem 11

Explain how each of the following will affect the average fixed cost, average variable cost, average total cost, and marginal cost curves faced by a steel manufacturer: $(L O I 1-3)$
a. New union agreement increases hourly pay.
b. Local government imposes an annual lump-sum tax per plant.
c. Federal government imposes a "stack tax" on emission of air pollutants by steel mills.
d. New steelmaking technology increases productivity of every worker.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
07:33

Problem 12

Graph the following table. (LOII-4)
a. What is marginal product and average product at each level of production?
b. Graph marginal product and average product.
c. Label the areas of increasing marginal productivity, diminishing marginal productivity, and diminishing absolute productivity.

Jake Zanazzi
Jake Zanazzi
Numerade Educator
01:48

Problem 13

If average product is falling, what is happening to shortrun average variable cost? $(L O 11-4)$

AG
Ankit Gupta
Numerade Educator
01:13

Problem 14

If marginal cost is increasing, what do we know about average cost? $(L O I I-4)$

Lauren Shelton
Lauren Shelton
Numerade Educator
01:32

Problem 15

A firm has fixed costs of $\$ 100$ and variable costs of the following: $(L O 11-4)$

Narayan Hari
Narayan Hari
Numerade Educator
01:13

Problem 16

If average productivity falls, will marginal cost necessarily rise? How about average cost? $(L O 11-4)$

Lauren Shelton
Lauren Shelton
Numerade Educator
03:46

Problem 17

An economic consultant is presented with the following total product table and asked to derive a table for average variable costs. The price of labor is $\$ 15$ per hour. $(L O I I-4)$
a. Help him do so.
b. Show that the graphs of the average productivity curve and average variable cost curve are mirror images of each other.
c. Show the marginal productivity curve for labor inputs between 1 and $5 .$
d. Show that the marginal productivity curve and marginal cost curve are mirror images of each other.

Niamat Khuda
Niamat Khuda
Numerade Educator
02:06

Problem 18

Say that a firm has fixed costs of $\$ 100$ and constant average variable costs of $\$ 25 . \quad(L O 11-4)$
a. Show $A F C, V C, A V C,$ and $M C$ in a table.
b. Graph the $A F C, A T C, A V C,$ and $M C$ curves.
c. Explain why the curves have the shapes they do.
d. What law is not operative for this firm?

Andrew Davis
Andrew Davis
Numerade Educator
33:06

Problem 19

Say a firm has $\$ 100$ in fixed costs and its average variable costs increase by $\$ 5$ for each unit, so that the cost of 1 is $\$ 25$, the cost of 2 is $\$ 30,$ the cost of 3 is $\$ 35,$ and so on. $(L O 11-4)$
a. Show $V C, A F C, A V C,$ and $M C$ in a table.
b. Graph the $A F C, A T C, A V C,$ and $M C$ curves associated with these costs.
c. Explain how costs would have to increase in order for the curves to have the "normal" shapes of the curves presented in the text.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator