Chapter 2, Problem 2.8P

Give two examples of explicit cost for a firm

A firm has a fixed production cost of $4000. For the first 100 units of production, the firm has a marginal cost of $50 per unit produced. Producing more than 100 units has a marginal cost of $70 per unit produced. The firm cannot produce more than 150 units. How much does it cost to produce at q=0? at  q=50? at q=100? at q=125? at q=150? Graph the firm’s marginal cost function

Graphically show the relationship between the total fixed cost, the total variable cost, and the total cost. Draw a total cost curve and total revenue curve so that at some outputs that the firm takes losses, outputs where the firm makes unnecessary profits, and where the firm makes only necessary profits. Then, pick a point where the firm is taking losses and show on the graph, the firm’s total losses. Do the same for a point (an output level) where the firm may be making unnecessary profits.

Suppose that the Acme Gumball Company has a fixed proportions production function that requires it to use two gumball presses and one worker to produce 1,000 gumballs per hour. a. Explain why the cost per hour of producing 1,000 gumballs is 2v + w (where v is the hourly rent for gumball presses and w is the hourly wage). b. Assume Acme can produce any number of gumballs they want using this technology. Explain why the cost function in this case would be TC = q(2v +w), where q is output of gumballs per hour, measured in thousands of gumballs. c. What is the average and marginal cost of gumball production (again, measure output in thousands of gumballs)? Graph the average and marginal cost curves for gumballs assuming v=3, w-5 Now graph these curves for  v=6, w=5. Explain why these curves have shifted.

Suppose that the Acme Gumball Company has a fixed proportions production function that requires it to use two gumball presses and one worker to produce 1,000 gumballs per hour. a. Explain why the cost per hour of producing 1,000 gumballs is 2v + w (where v is the hourly rent for gumball presses and w is the hourly wage). b. Assume Acme can produce any number of gumballs they want using this technology. Explain why the cost function in this case would be TC = q(2v +w), where q is output of gumballs per hour, measured in thousands of gumballs. c. What is the average and marginal cost of gumball production (again, measure output in thousands of gumballs)? (show the complete formula) Draw the graph for the average and marginal cost curves for gumballs assuming v=3, w-5 (show working) Now draw the graph for these curves for  v=6, w=5.( show working) Explain why these curves have shifted.

Consider Firm GM, a car manufacturer. Suppose you have some information regarding the cost curves of Firm GM: Output Average Cost ( at that output level) Marginal Cost of that Car 9,999 ? $ 12,000 10,000 $ 14,000 $ 11,500 19,999 $ 12,500 20,000 ? $ 12,600 Will the Average Cost of 9,999 cars be greater than $ 14,000 , less than $ 14,000, or can you not tell with the information given? ( Hint: it might help to draw a graph of AC and MC, and see if you can place units 9,999 and 10,000 on that graph). O Greater than $ 14,000 O Less Than $ 14,000 O Can't Tell with the information given

A Chinese high technology manufacturing firm has a production function of 0.80 0.20 q=16L (based on Zhang, et al., 2012). It faces prices of w=$8 and r= $2. What are its short-run average variable and marginal cost curves? Let K be fixed in the short run. The firm's short-run average variable cost curve, AVC, as a function of K and q is AVC=$ (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcute. E.g., a superscript can be created with the character.)   Write AVC and MC functions

Yennefer produces spells. Suppose q is the quantity of spells produced. Her Total Costs are given byTC(g)=101+q^2 and her Marginal Costs are given by MC(g)=2q. What is the quantity of spells thatminimizes her Average Total Cost?

Sergio Lopez is a publisher of Latin American poetry.  His fixed cost is $525, and the cost to produce each individual copy of his book is $3.50.  Currently, Sergio is selling these books for $6 each. So far this year, he has produced x  a. Write a linear cost function C for Sergio’s book production, in terms of x.   b. Find the linear revenue function R for selling x copies of the book.  Remember that P(x) = (price)x.    c. Use and 1b. to determine the profit function P for selling x books.  Write the formula in simplified form.  d.Use your answer for 1c to determine the profit, in dollars, for selling 300 books.