Changes

Examples of variable costs are labor, packaging, and raw materials, because they change in relation to the output unlike fixed costs.

Examples of variable costs are labor, packaging, and raw materials, because they change in relation to the output unlike fixed costs.

The Lecture mentioned how a prior student in this course is paying her way through college by working as a waitress in a fancy Manhattan restaurant. Suppose her boss told her one day, "We were profitable last month. To increase our profits next month, I'm going to double our number of waitresses so that we can serve more people!" But our former economics student told him that his plan would fail because there is _____________ returns of scale in the restaurant, because more waitresses would result in more wasted time talking to each other and waitresses getting in the way of each other.  

2.The Lecture mentioned how a prior student in this course is paying her way through college by working as a waitress in a fancy Manhattan restaurant. Suppose her boss told her one day, "We were profitable last month. To increase our profits next month, I'm going to double our number of waitresses so that we can serve more people!" But our former economics student told him that his plan would fail because there is _____________ returns of scale in the restaurant, because more waitresses would result in more wasted time talking to each other and waitresses getting in the way of each other.  

Diminishing (marginal) returns, for if you continually increase your input eventually your output will decrease.

Diminishing (marginal) returns, for if you continually increase your input eventually your output will decrease.

Give an example of a "short run" cost for a firm, and give an example of a "long run" cost. This can refer to any type of firm, from a grocery store to a baseball team to a homeschool.  

3.Give an example of a "short run" cost for a firm, and give an example of a "long run" cost. This can refer to any type of firm, from a grocery store to a baseball team to a homeschool.  

At a law firm a “short run” cost would be hiring someone overtime to complete a vital document that is needed for the next day’s early, important meeting. An example of a “long run” cost, which is cheaper and more efficient, would be to hire an extra person so that work would get done faster and that the incident of having to pay overtime for someone would not occur.

At a law firm a “short run” cost would be hiring someone overtime to complete a vital document that is needed for the next day’s early, important meeting. An example of a “long run” cost, which is cheaper and more efficient, would be to hire an extra person so that work would get done faster and that the incident of having to pay overtime for someone would not occur.

Suppose you own a mechanics' shop that fixes cars, and you have 4 employees whom you pay $12 per hour. On average your 4th employee can fix 3 cars an hour. What is your marginal product (MP) and marginal cost (MC), and what is the minimum on average that you need to charge customers (your marginal revenue) for fixing cars? (Assume your only cost is labor, and the customer pays the cost of any parts.)  

 

4.Suppose you own a mechanics' shop that fixes cars, and you have 4 employees whom you pay $12 per hour. On average your 4th employee can fix 3 cars an hour. What is your marginal product (MP) and marginal cost (MC), and what is the minimum on average that you need to charge customers (your marginal revenue) for fixing cars? (Assume your only cost is labor, and the customer pays the cost of any parts.)  

The marginal product is 3, the marginal cost is $4, and the marginal revenue is $4.

The marginal product is 3, the marginal cost is $4, and the marginal revenue is $4.

Earlier in this course we learned that someone who obtains a college degree earns, over the course of his life, about $500,000 more than someone who does not. How can you explain this fact in terms of the advantages of "long run" costs over "short run" costs?  

5.Earlier in this course we learned that someone who obtains a college degree earns, over the course of his life, about $500,000 more than someone who does not. How can you explain this fact in terms of the advantages of "long run" costs over "short run" costs?  

Obstacles in your life could hold you back if you did not have a college degree. First, you will be more appealing for a higher paying job than a high school graduate and you will also have more experience and knowledge about the world and how it works. Overall, going to college will help make your life a bit easier and more efficient since you will have the knowledge and power when troubles come your way. By earning a college degree, you have an advantage over the person who only went to high school and not to college. You will be able to surmount difficult situations. Spending the money, the “long run” costs, and going to college is cheaper in the long run than not spending the money and not going to college. You will not be able to earn as much as a college graduate, and this lost income will, in the end, be greater than the original price for the college education.  

Obstacles in your life could hold you back if you did not have a college degree. First, you will be more appealing for a higher paying job than a high school graduate and you will also have more experience and knowledge about the world and how it works. Overall, going to college will help make your life a bit easier and more efficient since you will have the knowledge and power when troubles come your way. By earning a college degree, you have an advantage over the person who only went to high school and not to college. You will be able to surmount difficult situations. Spending the money, the “long run” costs, and going to college is cheaper in the long run than not spending the money and not going to college. You will not be able to earn as much as a college graduate, and this lost income will, in the end, be greater than the original price for the college education.  

Suppose you own and drive a taxicab, and its annual license fee is $1000 per year. Suppose you learn that the license fee will increase to $1200 next year. Does this increase either increase, decrease, or have no effect on (a) marginal cost, (b) average variable cost, and (c) average total cost?  

7.Suppose you own and drive a taxicab, and its annual license fee is $1000 per year. Suppose you learn that the license fee will increase to $1200 next year. Does this increase either increase, decrease, or have no effect on (a) marginal cost, (b) average variable cost, and (c) average total cost?  

(A) increase

(A) increase

(C) increase

(C) increase

Suppose you could earn $8 an hour. Instead, you watch television for an hour. What is your accounting profit or loss, and what is your economic profit or loss, for that hour?

8.Suppose you could earn $8 an hour. Instead, you watch television for an hour. What is your accounting profit or loss, and what is your economic profit or loss, for that hour?

Your accounting loss is zero and your economic loss is $8 because instead of wasting an hour watching TV you could have earned $8 by working. For some people an hour of TV is worth $8 dollars, but in the long run, they are losing money and efficiency because they are wasting time watching TV. They could have been doing something that benefits themselves and others instead of sitting in front of the TV mesmerized and doing nothing.

Your accounting loss is zero and your economic loss is $8 because instead of wasting an hour watching TV you could have earned $8 by working. For some people an hour of TV is worth $8 dollars, but in the long run, they are losing money and efficiency because they are wasting time watching TV. They could have been doing something that benefits themselves and others instead of sitting in front of the TV mesmerized and doing nothing.

Honors

Honors