Economics Homework Six Answers - Student Eleven
1. Fixed Costs can be easily identified by seeing what the total costs are when output is _______.
An example of a variable cost is an electric bill. Depending upon the business, the bill could be more or less during the month due to the increase or decrease of goods being made.
2. There would be a diminishing return. The possibility of more waitresses could hold to have a negative effect; the waitresses would have more time to talk to one another and get in the way of on another. Even if the business was profitable the previous month, it does not mean that the restaurant would be profitable again this next month. There could be fewer customers or have an unexpected expense arise.
- Superb. But note that the term is "decreasing" returns to scale. Don't confuse this with "diminishing marginal utility."
3. A local department store can have the “long run” cost of owning the building in which it sells its goods. A “short run” cost of the department store would be the clothing it sold.
4. MP= $ 48
MC= $ 60 Average Cost per car = $ 4
- No, this is not right. MP=3 cars per hour of labor. MC=$4 per car. MR must be equal to MC so MR=$4 per car. The question did not ask for "average cost per car." (Minus 3).
5. College can be an expensive and trying time for a struggling student. The student may want to drop out because of the expense, time, and effort that college requires. However, the student does not realize the benefits he or she will receive in the long run. The student will have a degree in which will make him or her a better contender when applying for a job. The new job can lead to owning a home and a car or cars. College can give a person life experience and knowledge that could not be found anywhere else.
6. Fixed Cost = $ 1 Million
Average Variable Cost =$20,000 Average Total Cost = $1,020,000 Marginal Cost = $19,960
- First two are correct. The third is incorrect because it did not take the TOTAL cost ($2 million) and divide it by the number of cars to find the AVERAGE. The final answer (MC) is incorrect because it is simply the cost of making the last unit: $18,000. (Minus 1).
7. (a) $200 Increase
(b) No effect (c) $200 Increase
- (a) is incorrect. There is no effect. The other two answers are correct. (Minus 1).
8. Accounting Profit (loss) - $0. There was neither profit nor gain because there were no transactions made.
Economic Profit (loss) - $ 8 loss. There was an economic loss of eight dollars because time was wasted on watching television when you could have made money working.
- 65/70, with some good answers. Be sure to go over these carefully, using the model answers when available after Sunday.--Andy Schlafly 09:54, 25 October 2009 (EDT)