Book: economics a contemporary introduction

angle of d out- 1. Explicit and Implicit Costs Amos Mccoy is currently raising s from corn on his 100-acre farm and earning an accounting profit of a. An increase in the wage rate $100 per acre. However, if he raised soybeans, he could earn an b. A decrease in property taxes If you of the accounting profit of $200 per acre. Is he currently earning an c. A rise in the purchase price of new capital economic profit? Why or why not? d. A rise in energy prices in lays 2. Explicit and Implicit Costs Determine whether each of the fol- 10. Costs in the Short Run Identify each of the curves in the fol- er. But lowing is an explicit cost or an implicit cost: lowing graph: cost a. Payments for labor purchased in the labor market b. A firm's use of a warehouse that it owns and could rent to another firm c. Rent paid for the use of a warehouse not owned by the firm d. The wages that firm owners could earn if they did not work for themselves riable, Alternative Measures of Profit Calculate the accounting prof- Cost per unit WREC-Im curve, it or loss as well as the economic profit or loss in each of the a se following situations: s best a. A firm with total revenues of $150 million, explicit costs of $90 million, and implicit costs of $40 million ge cost . A firm with total revenues of $125 million, explicit costs of rage $100 million, and implicit costs of $30 million ze al- A firm with total revenues of $100 million, explicit costs of $90 million, and implicit costs of $20 million Quantity Xten- d. A firm with total revenues of $250,000, explicit costs of 100.0 erage S still $275,000, and implicit costs of $50,000 11. Marginal Cost and Average Cost Explain why the marginal cost 4. Alternative Measures of Profit Why is it reasonable to think cost curve must intersect the average total cost curve and the es of of normal profit as a type of cost to the firm? average variable cost curve at their minimum points. Why do on- 5. Short Run Versus Long Run What distinguishes a firm's short- the average total cost curve and average variable cost curve get run period from its long-run period? closer to one another as output increases? 12. Marginal Cost and Average Cost In Exhibit 7 in this chapter, sired 6. Law of Diminishing Marginal Returns As a farmer, you must the output level where average total cost is at a minimum is s be- decide how many times during the year to plant a new crop. firm Also, you must decide how far apart to space the plants. Will greater than the output level where average variable cost is at a diminishing returns be a factor in your decision making? If so, minimum. Why? how will it affect your decisions? 13. Long-Run Average Cost Curve What types of changes could 7. Marginal Cost What is the difference between fixed cost shift the long-run average cost curve? How would these changes also affect the short-run average total cost curve? and variable cost? Does each type of cost affect short-run marginal cost? If yes, explain how each affects marginal 14. Long-Run Average Cost Curve Explain the shape of the long-run cost. If no, explain why each does or does not affect mar- average cost curve. What does "minimum efficient scale" mean? ginal cost. 15. Case Study: Scale Economies and Diseconomies At the 8. Marginal Cost Explain why the marginal cost of production Movies Concession stands account for well over half the prof- must increase if the marginal product of the variable resource is its at most theaters. Given this, what are the benefits of the stag- decreasing. gered movie times allowed by multiple screens? Costs in the Short Run What effect would each of the follow - 16. Scale Economies and Diseconomies In analyzing scale econo- ing have on a firm's short-run marginal cost curve and its fixed mies and diseconomies, what's the difference between the plant level and the firm level? cost curve ? ROU