1. The region of Sicily in Italy recently passed a regulation requiring commercial pesticide applicators that use restricted-use pesticides and regulated herbicides to pay a licensing fee of 2,500. As a result of this fee, the costs incurred bycommercial pesticide companies will change as follows:
2. Marginal cost, average fixed cost and average variable cost will increase.
3. Marginal cost and average total cost will be unchanged, while total fixed cost will increase.
4. Marginal cost will increase, while average variable cost and average total cost will stay the same.
5. Marginal cost, average fixed cost and average total cost will increase.
6. Marginal cost and average variable cost will be unchanged, while total fixed cost will increase.

5 points

QUESTION 13

1. In May, Sony purchased a million memory chips, enough for approximately four months of production of Sony's personal computers, at $4 per chip. By July, the market price of chips had fallen to $3, and Sony decided to take advantage of the new lower price and purchased an additional million chips. In deciding which chips to use in its production during the month of July, Sony should
2. use only the chips purchased at $3 because that will lower production costs.
3. use only chips purchased at $4 to get rid of the high cost chips as quickly as possible.
4. use only the chips purchased at $4 because the cost of those chips is sunk.
5. produce using either chip; it doesn't matter.
6. use equal numbers of $3 and $4 chips because that will minimize average cost over the long run.