Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. The shapes of long-run cost curves follow directly from the assumption
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Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true.
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The shapes of long-run cost
curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns. -
The optimal scale of plant is the scale of plant that maximizes average cost.
- In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost.
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- Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. The shapes of long-run cost curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns. The optimal scale of plant is the scale of plant that maximizes average cost. In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost. Answer correctly and explain within 30mins will give you positive feedback.Explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is on the rise. People often believe that large firms in an industry have cost advantages over small firms in the same industry. For example, they might think a big oil company has a cost advantage over a small oil company. For this to be true, what condition must exist? Explain your answer.In a fishery the long-run harvest function (harvest volume) is H(E) = aE – bE?, with a, b representing positive constants and E is fishing effort. Total cost is TC(E)= cE,with c being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated with reductions in long-run total revenue (TR). Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.
- Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?Suppose a typical (representative) corn farm has a short run production technology which results in the outcome of U-shaped Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC). Further, suppose this firm sells its product in a market where the price of the good is determined by the interaction of market Demand and Supply. Because an individual firm is very small compared to the rest of the market, we treat the market price as the price given to the firm, and the individual firm cannot impact that price. assume we are in the Short Run for this firm. In graphing, put $ on the vertical axis and lower-case q (firm output) on the horizontal axis. Start with the AFC0, AVC0, ATC0, and MC0 curves . show shifts in any of the cost curves, reflecting the higher cost of land (keeping in mind that this higher cost is independent of how much or how little corn is actually produced) and labeling the changed cost curves with a subscript 1. On the graph with $ on the…A firm is jointly owned by Juan and Roda. The firm’s production function requires two inputs: effort by Juan, denoted by x, and effort by Roda, denoted by y. Effort is only observable by the person who exerts it. The cost to Juan of a unit of his effort is c j = 2 and the cost to Roda for a unit of her effort is cr = 2. The price received for the goods is p = 2. The production of the firm is given by Q = 10(ln(x + 1) + ln(y + 1)). Assume that both Juan and Roda are risk-neutral rational agents.a) What are the socially optimal amounts of effort x* and y*? What is the total surplus in that case? (Hint: Solve the problem of a social planner that cares equally for Juan and Roda.)b) Suppose that Juan and Roda have a contract that specifies that Juan pays a fixed amount w = 15 to Roda and that Juan gets to keep and sell all the output. What is the total surplus now? How much of that surplus goes to Juan? To Roda?c) Now suppose that the contract between Juan and Roda specifies that the total…
- The two side by side graphs are for two firms that between them supply all the original grown advocados for a local area. With vigorous competition between the firms, the price per pound has settled at a point where both firms are just breaking even. For each firm, the marginal cost (mc) average variable cost (avc) and average total (atc) curves are shown In the blank graph below, use the straight line tool to draw a straight line representing the short run market supply curve for quantities above zero. (that is Dont worry about operating points for which the quantity is zero)1.1) Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output? 1.2) Assume the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and that firms attempt to minimize costs. The total variable cost of producing one unit of output is. Show Calculation 1.3) Refer to Table 8.1. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average variable cost of producing two units of output is. Show Calculation 1.4) Refer to Table 8.1. Assume the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and that firms attempt to minimize costs. The marginal cost of producing the third unit of output is. Show CalculationHobbiesCo is a firm that produces model trains in a perfectly competitive market. The production of each model train requires millilitres of paint (P), and grams of wood (W). Their production function is given by f(P, W) = min (6 √ P, 3W − 12). Question: Draw the isoquant corresponding to q = 48 trains in a clearly labelled diagram where P is the horizontal axis and W is the vertical axis. Label two distinct input bundles (P, W) in the diagram which give q = 48. Could you please help with the above question? Thanks!
- Douglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company’s total cost of production at various production quantities. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $155, so you should start your ATC curve by placing a green point at (1, 155). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $95, so you should start your MC curve by placing an orange square at (0.5, 95).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.Hi! Can you help me with the question below? Northside Social (NS) sells cups of coffee and amazing breakfast sandwiches. The current price of a cup of coffee is $3.00 and the current price of an amazing breakfast sandwich is $8.00. At those prices, NS sells 1000 cups of coffee and 200 breakfast sandwiches daily. NS faces a constant marginal cost for each cup of coffee of 50 cents and the constant marginal cost of breakfast sandwiches is $2. NS increases the price of coffee 5%, to $3.15. After the price increase, NS sells 900 cups of coffee, a decrease of 10% in cups of coffee. Demand for coffee at NS at this price interval is best described as:A) ElasticB) InelasticC) Unitary ElasticD) Perfectly ElasticConsider an individual firm competing in a market with many other producers and producing an undifferentiated product (i.e., consumers consider the product from one firm to be exactly as good as the product from any other firm). Assume this firm faces a conventional production technology. The short-run production function has a small range of increasing marginal product (increasing marginal returns) and then is subject to the Law of Diminishing Marginal Product (diminishing marginal returns). Putting quantity q on the horizontal axis and dollars $ on the vertical axis, depict four important curves: Average Fixed Cost (AFC), Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC). Label each of these curves with the subscript 0 to indicate that these are the original (or current) curves. For this question, assume the individual producers in this industry have no control over prices; they must accept the exogenously given price, P0. On a graph containing the four…