Micro Chapter 4 Practice Essay

Submitted By nbrady29
Words: 684
Pages: 3

Nick Brady
1293754
3/29/13
Costs and Profit 1) Revenue = 28 x 100 x 3 = $8400
Explicit Costs = 1600 + (28 x 100 x 2) + ((20 x 3 x 6) + (8 x 8 x 6)) = 1600 + 5600 + 744 = $7944
Implicit costs = 20 x 5 x 10 = $1000
Accounting profit = revenue – explicit costs = 8400 – 7944 = $456
Economic profit = revenue – (explicit costs + implicit costs) = 8400 – (7944 + 1000) = -$544 2) a) Marginal product is the change in output with one more unity of input. b) Inputs in Units | Total Output in Units | Marginal Product | 0 | 0 | 0 | 1 | 3 | 3 | 2 | 8 | 5 | 3 | 15 | 7 | 4 | 24 | 9 | 5 | 30 | 6 | 6 | 34 | 4 | 7 | 35 | 1 |

c)

d) The marginal product for the 4th worker is 9 because the difference of output between the 3rd and 4th workers is 9. e) At the 5th worker because that is the first worker who has a negative change in marginal product 3) One would be the rent that the firm pays for the factory they use because no matter if the produce anything or not they will have to pay it. Also, the utilities that a company pays are considered fixed because they are always paid even without production. 4) Wages are variable short run costs because if you don’t produce anything you won’t need workers. Also, the inputs used in the production of the good like wood for chairs are variable costs because you only need to purchase them if you are producing. 5) You can determine if the firm should increase or decrease its production based on the difference in its marginal product. 6) f) Output | Fixed Cost | Variable Cost | Total Cost | 0 | 50 | 0 | 50 | 1 | 50 | 30 | 80 | 2 | 50 | 55 | 105 | 3 | 50 | 70 | 120 | 4 | 50 | 95 | 145 | 5 | 50 | 125 | 175 | g) h) The fixed cost curve is horizontal because fixed costs do not depend on the production level. i) The vertical distance between the variable cost curve and the total cost curve is the fixed cost.

7) j) Output | Fixed Costs | Variable Costs | Total Cost | Marginal Costs | Average Fixed Costs | Average Variable Costs | Average Total Cost | 0 | 50 | 0 | 50 | | | | | 1 | 50 | 30 | 80 | 30 | 50 | 30 | 80 | 2 | 50 | 55 | 105 | 25 | 25 | 27.5 | 52.5 | 3 | 50 | 70 | 120 | 15 | 16.667 | 23.333 | 40 | 4 | 50 | 100 | 150 | 30 | 12.5 | 25 | 37.5 | 5 | 50 | 140 | 190 | 40 | 10 | 28 | 38 | 6 | 50 | 190 | 240 | 50 | 8.333 | 31.667 | 40 | 7 | 50 | 270 | 320 | 80 | 7.143 | 38.571 |…