11.2 Q&A

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What is the difference between the short run and the long run?

Is the amount of time that separates the short run from the long run the same for every firm?

In the short-run, at least one of a firms input is fixed, while in the long-run, a firm is able to vary all its inputs. NO.

Any cost that remains unchanged as output changes represents a firm’s..?

Any cost that changes as output changes represents a firm’s..?

Which of the following is most likely to be a fixed cost for a farmer..?

Which of the following is s most likely to be a variable cost for a business firm…?

fixed cost variable cost insurance premiums on property. (Does not scale with crop production…) cost of shipping products. (Scales with sales)

What are implicit costs?

How are implicit costs different from explicit costs?

a non-monetary opportunity cost An explicit cost is a cost that involves spending money, while an implicit cost non-monetary cost

A firms production function is best described as…?

A short-run production function holds constant…?

illustrating the relationship between inputs and the maximum of output the firm can produce with these inputs the amount of labor

Can we conclude from this information that Apple is making a profit of about $619 per IPhone? Briefly explain.
Apples profit is…?

likely to be less than $619 per Iphone because Apple also has fixed costs of production.

[Related to making the connection] Many firms consider wages to be variable costs. Why do academic book publishers usually consider their wage and salary costs to be fixed costs?

Academic book publishers typically consider the cost of travel…?

Employees work on several books simultaneously to be fixed cost because it remains constant as output changes.

[Related to making the connection] For Jill Johnsons pizza restaurant, explain whether each of the following is a fixed or variable cost.:

a. Payment she makes on fire insurance policy?
b. payment she makes to buy pizza dough
c. wages she pays her workers?
d. The lease payment to her landlord..?
e. The $300 per month payment she makes to her local newspaper for weekly advertising

a. fixed b. variable c. variable d. fixed e. fixed

[Related to making the connection] … How can these companies sell the same book for a lower price than the government and still cover their costs?

These companies decrease their average cost of production by increasing production from low level

Using the information provided, complete the table given below

What was the opportunity cost to Bennett of his team playing in Seattle rather than Oklahoma city?

82 Million because that is the value of the move to Oklahoma city. ($63M of avoided loss PLUS $19M of profit)

Suppose Jill Johnson operates in a building she owes in the center of the city. Similar buildings in the neighborhood rent for $4000 per month. Jill is considering selling her building and renting space in the suburbs for $3000 a month. Jill decides not to make the move. She reasons {..}
What do you think of Jills reasoning?

Jill is incorrectly ignoring the opportunity cost of using the building she owns.

When DuPint chemical company first attempted […]

Why did this report includes as part of the company’s loss the amount it had expected to earn (but didn’t) on its investment in manufacturing paint?

The report sought to include implicit costs because DuPont could have invested its money elsewhere and earned $500000

Which costs are affected by the level of output produced?

Variable costs

Refer to the table below. Which of the following cots are implicit costs?

Which of the following are sometimes called accounting costs?

the forgone salary and interests Explicit costs

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the

production function

Which of the Graphs represents a typical avg. total cost curve?

The U-Shaped curve.

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