1. Economic profit equals minus. 2. Economic cost equals cost plus cost. 3. For a perfectly competitive...

Question:

1. Economic profit equals ________minus________.
2. Economic cost equals ________cost plus ________cost.
3. For a perfectly competitive firm, marginal revenue equals ________, and to maximize profit, the firm produces the quantity at which ________equals.
4. The market price for wheat is $5. If a farmer s marginal cost is $7, the farmer should produce ________ (more/less) output.
5. At the current output level, a farmer s marginal cost of producing sugar is $0.30. If the price of sugar is $0.22 per pound the farmer should________(increase/decrease) production. If the price of sugar is $0.32 per pound, the farmer should________(increase/decrease) production.
6. A firm produces 20 units of output at a market price of $5, a marginal cost of $5, and an average cost of $3. The firms economic profit is $ ________, and the firm________ (is/is not) maximizing its economic profit.
7. If the market price equals a firms break-even price, the firm earns ________economic profit because ________equals ________.
8. A decrease in price________ (increases/decreases) a firm€™s marginal revenue, so it (increases/decreases) the quantity supplied. This is the law of________ in action.
9. More or Fewer Deliveries? Consider a delivery firm that delivers packages by bicycle, charging $13 per package and paying each of its workers $12 per hour. One day, one of the workers was two hours late to work, and the number of packages delivered that day decreased by one package.
a. Did the tardiness of the worker increase or decrease the firm€™s profit?
b. Based on the new information provided by this experience, should the firm produce more deliveries by increasing its workforce, or produce fewer deliveries by reducing its workforce? Explain, using the marginal principle.
10. Advice for a Firm. You€™ve been hired as an economic consultant by a price-taking firm that produces scarves. The firm already has a factory, so it is operating in the short run. The price of scarves is $9, the hourly wage is $24, and each scarf requires $1 worth of material. The following table shows the relationship between the number of workers and the output of scarves a. Fill in the blanks in the table.
b. What is the profit-maximizingoutput?