Problem Set 1: Fill the Missing Blanks.
Exercise \(\PageIndex{1}\)
What goes in each blank?
The firm's quantity is 500 units
Total fixed cost is $1,400
Total cost is $3,400
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,400
Total cost is $3,400
Total variable cost is $2,000
The break-even price point is $6.80
The short-run shutdown price point is $4.00
Average variable cost is $4.00
Entry ceases when price falls below $6.80
Exercise \(\PageIndex{2}\)
What goes in each blank?
The firm's quantity is 1,000 units
Total fixed cost is $1,500
Total cost is $3,700
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $1,500
Total cost is $3,700
Total variable cost is $2,200
The break-even price point is $3.70
The short-run shutdown price point is $2.20
Average variable cost is $2.20
Entry ceases when price falls below $3.70
Exercise \(\PageIndex{3}\)
What goes in each blank?
The firm's quantity is 2,000 units
Total fixed cost is $1,400
Total cost is $3,800
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $1,400
Total cost is $3,800
Total variable cost is $2,400
The break-even price point is $1.90
The short-run shutdown price point is $1.20
Average variable cost is $1.20
Entry ceases when price falls below $1.90
Exercise \(\PageIndex{4}\)
What goes in each blank?
The firm's quantity is 500 units
Total fixed cost is $1,300
Total cost is $3,900
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,300
Total cost is $3,900
Total variable cost is $2,600
The break-even price point is $7.80
The short-run shutdown price point is $5.20
Average variable cost is $5.20
Entry ceases when price falls below $7.80
Exercise \(\PageIndex{5}\)
What goes in each blank?
The firm's quantity is 1,000 units
Total fixed cost is $1,200
Total cost is $4,000
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $1,200
Total cost is $4,000
Total variable cost is $2,800
The break-even price point is $4.00
The short-run shutdown price point is $2.80
Average variable cost is $2.80
Entry ceases when price falls below $4.00
Exercise \(\PageIndex{6}\)
What goes in each blank?
The firm's quantity is 2,000 units
Total fixed cost is $1,100
Total cost is $4,100
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $1,100
Total cost is $4,100
Total variable cost is $3,000
The break-even price point is $2.05
The short-run shutdown price point is $1.50
Average variable cost is $1.50
Entry ceases when price falls below $2.05
Exercise \(\PageIndex{7}\)
What goes in each blank?
The firm's quantity is 500 units
Total fixed cost is $1,000
Total cost is $4,200
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,000
Total cost is $4,200
Total variable cost is $3,200
The break-even price point is $8.40
The short-run shutdown price point is $6.40
Average variable cost is $6.40
Entry ceases when price falls below $8.40
Exercise \(\PageIndex{8}\)
What goes in each blank?
The firm's quantity is 1,000 units
Total fixed cost is $900
Total cost is $4,300
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $900
Total cost is $4,300
Total variable cost is $3,400
The break-even price point is $4.30
The short-run shutdown price point is $3.40
Average variable cost is $3.40
Entry ceases when price falls below $4.30
Exercise \(\PageIndex{9}\)
What goes in each blank?
The firm's quantity is 2,000 units
Total fixed cost is $800
Total cost is $4,400
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $800
Total cost is $4,400
Total variable cost is $3,600
The break-even price point is $2.20
The short-run shutdown price point is $1.80
Average variable cost is $1.80
Entry ceases when price falls below $2.20
Exercise \(\PageIndex{10}\)
What goes in each blank?
The firm's quantity is 500 units
Total fixed cost is $700
Total cost is $4,500
Total variable cost is $____
The break-even price point is $____
The short-run shutdown price point is $____
Average variable cost is $____
Entry ceases when price falls below $____
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $700
Total cost is $4,500
Total variable cost is $3,800
The break-even price point is $9.00
The short-run shutdown price point is $7.60
Average variable cost is $7.60
Entry ceases when price falls below $9.00
Problem Set 2: Fill the Missing Blanks.
Exercise \(\PageIndex{1}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $3,400
Total variable cost is $____
The break-even price point is $6.80
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $2.80
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,400
Total cost is $3,400
Total variable cost is $2,000
The break-even price point is $6.80
The short-run shutdown price point is $4.00
Average variable cost is $4.00
Average fixed cost is $2.80
Exercise \(\PageIndex{2}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $3,700
Total variable cost is $____
The break-even price point is $3.70
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $1.50
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $1,500
Total cost is $3,700
Total variable cost is $2,200
The break-even price point is $3.70
The short-run shutdown price point is $2.20
Average variable cost is $2.20
Average fixed cost is $1.50
Exercise \(\PageIndex{3}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $3,800
Total variable cost is $____
The break-even price point is $1.90
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $0.70
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $1,400
Total cost is $3,800
Total variable cost is $2,400
The break-even price point is $1.90
The short-run shutdown price point is $1.20
Average variable cost is $1.20
Average fixed cost is $0.70
Exercise \(\PageIndex{4}\)
What goes in each blank?
The firm's quantity is 2,000 units
Total fixed cost is $1,400
Total cost is $3,800
Total variable cost is $2,400
The break-even price point is $1.90
The short-run shutdown price point is $1.20
Average variable cost is $1.20
Average fixed cost is $0.70
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,300
Total cost is $3,900
Total variable cost is $2,600
The break-even price point is $7.80
The short-run shutdown price point is $5.20
Average variable cost is $5.20
Average fixed cost is $2.60
Exercise \(\PageIndex{5}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,000
Total variable cost is $____
The break-even price point is $4.00
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $1.20
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $1,200
Total cost is $4,000
Total variable cost is $2,800
The break-even price point is $4.00
The short-run shutdown price point is $2.80
Average variable cost is $2.80
Average fixed cost is $1.20
Exercise \(\PageIndex{6}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,100
Total variable cost is $____
The break-even price point is $2.05
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $0.55
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $1,100
Total cost is $4,100
Total variable cost is $3,000
The break-even price point is $2.05
The short-run shutdown price point is $1.50
Average variable cost is $1.50
Average fixed cost is $0.55
Exercise \(\PageIndex{7}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,200
Total variable cost is $____
The break-even price point is $8.40
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $2.00
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $1,000
Total cost is $4,200
Total variable cost is $3,200
The break-even price point is $8.40
The short-run shutdown price point is $6.40
Average variable cost is $6.40
Average fixed cost is $2.00
Exercise \(\PageIndex{8}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,300
Total variable cost is $____
The break-even price point is $4.30
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $0.90
-
Answer
-
The firm's quantity is 1,000 units
Total fixed cost is $900
Total cost is $4,300
Total variable cost is $3,400
The break-even price point is $4.30
The short-run shutdown price point is $3.40
Average variable cost is $3.40
Average fixed cost is $0.90
Exercise \(\PageIndex{9}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,400
Total variable cost is $____
The break-even price point is $2.20
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $0.40
-
Answer
-
The firm's quantity is 2,000 units
Total fixed cost is $800
Total cost is $4,400
Total variable cost is $3,600
The break-even price point is $2.20
The short-run shutdown price point is $1.80
Average variable cost is $1.80
Average fixed cost is $0.40
Exercise \(\PageIndex{10}\)
What goes in each blank?
The firm's quantity is ____ units
Total fixed cost is $____
Total cost is $4,500
Total variable cost is $____
The break-even price point is $9.00
The short-run shutdown price point is $____
Average variable cost is $____
Average fixed cost is $1.40
-
Answer
-
The firm's quantity is 500 units
Total fixed cost is $700
Total cost is $4,500
Total variable cost is $3,800
The break-even price point is $9.00
The short-run shutdown price point is $7.60
Average variable cost is $7.60
Average fixed cost is $1.40
Problem Set 3: Multiple Choice.
Exercise \(\PageIndex{1}\)
-
Accounting cost differs from economic cost in that:
a) Accounting cost does not include fixed cost.
b) Accounting cost does not include opportunity cost.
c) Accounting cost is based on supply, but economic cost is based on both supply and demand.
d) Accounting cost is always larger than economic cost.
-
Answer
-
b
Exercise \(\PageIndex{2}\)
-
Which is true of a profit maximizing and price taking firm that faces a price above its shutdown point?
a) Marginal cost (MC) = average fixed cost.
b) It will lower its asking price in order to increase its profits.
c) MC < Marginal revenue (MR).
d) Price = MR = MC.
-
Answer
-
d
Exercise \(\PageIndex{3}\)
-
In supply, if the price of good A decreases and the quantity for good B increases then
a) Good A is a competing product to good B.
b) Good B is a joint product with good A.
c) Good A is a necessary luxury good.
d) Good B is normal necessity good.
-
Answer
-
a
Exercise \(\PageIndex{4}\)
-
Which is true of a price taking firm?
a) It can sell all that it wants at the going price.
b) Its actions have a negligible impact on the market price.
c) It will maximize profits by producing where price is equal to marginal cost.
d) All of the above.
-
Answer
-
d
Exercise \(\PageIndex{5}\)
-
Which is true of a price taking firm?
a) It is large and has power to take surplus from consumers in the form of a higher price.
b) The price it receives is not affected by its output choice.
c) It can set the market price in order to maximize its profits.
d) All of the above.
-
Answer
-
b
Exercise \(\PageIndex{6}\)
-
What is true of a price taking firm that faces a price above average variable cost?
a) It will set its quantity so that its marginal cost will equal the market price.
b) It has no control over the market price.
c) The firm’s marginal cost curve is the firm’s supply schedule.
d) All of the above.
-
Answer
-
d
Exercise \(\PageIndex{7}\)
-
Which causes the inverse supply schedule to decrease or shift inwards (to the left)?
a) An increase in the price of a joint product.
b) A decrease in input prices.
c) An improvement in production technology.
d) A reduction in production risk.
e) An increase in the price of a competing product.
-
Answer
-
e
Exercise \(\PageIndex{8}\)
-
Which best describes fixed cost?
a) Those expenses that vary with output.
b) Those expenses that result from market power. For example, a single buyer of an agricultural commodity might be able to fix the price and this imposes a large cost on farmers.
c) Cost that does not vary with output.
d) Cost that is crucial to identifying the shut-down point.
-
Answer
-
c
Exercise \(\PageIndex{9}\)
-
Which of the following would cause the inverse supply schedule to decrease (shift inwards to the left)?
-
An increase in the price of a competing product.
-
An increase in production risk.
-
An increase in input prices.
-
All of the above.
-
Answer
-
d
Exercise \(\PageIndex{10}\)
-
Which of the following would cause the supply schedule to increase (shift outwards to the right)?
a) An increase in consumer incomes.
b) An increase in the price of a joint product.
c) An increase in input prices.
d) All of the above.
-
Answer
-
b
Exercise \(\PageIndex{11}\)
-
In the short run, the firm will continue operating so long as:
a) Price is above average variable cost (AVC).
b) Price is above average fixed cost (AFC).
c) Price is above average total cost (AC).
d) Price is above the break-even point.
e) Choices (c) and (d) only.
-
Answer
-
a
Use the diagram below to answer the remaining problems in this problem set
Exercise \(\PageIndex{12}\)
-
Which production plans produce less than point S
a) Points T, U, and V.
b) Points U, V, and Y.
c) Points T and Z.
d) All of the above.
e) None of the above.
-
Answer
-
d
Exercise \(\PageIndex{13}\)
-
Which production plans cost less than point T
a) Points Y and S.
b) Points U, V, and Y.
c) Point Z.
d) Points U and V.
-
Answer
-
c
Exercise \(\PageIndex{14}\)
-
Which production plans do you know cost than same
-
Points T, U, and V.
-
Points U, V, and Y.
-
Points T and Z
-
Both choices (a) and (c).
-
Answer
-
a
Exercise \(\PageIndex{15}\)
-
Which production plans produce more output than Z
a) Point S only.
b) Points S, T, U, V, and Y.
c) Points S, U, V, and Y.
d) None of the above.
-
Answer
-
c
Exercise \(\PageIndex{16}\)
-
Which production plans do you know produce the same amount
a) Points T, U, and V.
b) Points U, V, and Y.
c) Points T and Z
d) Both choices (b) and (c).
-
Answer
-
d
Exercise \(\PageIndex{17}\)
-
Which production plan could be a profit maximum?
a) Point Z.
b) Points U or V.
c) Point S.
d) Points T or Y.
-
Answer
-
a
Exercise \(\PageIndex{18}\)
-
T produces the same amount as Z
a) True.
b) False.
-
Answer
-
a
Exercise \(\PageIndex{19}\)
-
T and Z cost the same
a) True.
b) False.
-
Answer
-
b
Exercise \(\PageIndex{20}\)
-
U produces the same amount as V
a) True.
b) False.
-
Answer
-
a
Exercise \(\PageIndex{21}\)
-
U and V cost the same
a) True.
b) False.
-
Answer
-
a
Exercise \(\PageIndex{22}\)
-
U produces the same amount as Y
a) True.
b) False.
-
Answer
-
a
Exercise \(\PageIndex{23}\)
-
U and Y cost the same
a) True.
b) False.
-
Answer
-
b