EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 3RQ
To determine
To state:Implications regarding isoquant when change in input doesn’t change output quantity, also discussion on management style employed.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Don Juan Perez runs a seafood restaurant on the central coast. His total income last year was $150,000. The rent was $48,000 per year. His labour costs were $42,000 and materials, food and other variable costs were $20,000. Don Juan Perez was going to work as a cookbook writer where he would have earned $40,000 per year, or as a chef de cuisine in another restaurant, where he would have earned $35,000. The economic utility of Don Juan Perez is:
Note: the answer is 0 (zero). Please clarify with calculations why this is the correct alternative.
Until recently, Mark worked as a financial advisor, earning $65,000 annually. Then he inherited a piece of commercial real estate that had been renting for $14,000 annually. Mark decided to leave his job and operate a sea food restaurant in the space he inherited. At the end of the first year, his books showed total revenues of $300,000, and paid a total cost of $200,000 for food, utilities, cooks, and other supplies: Show all your work including formulas learned to support your answer for each of the following:
A) Calculate his explicit costs:
B) Calculate his implicit costs.
C) Calculate his accounting profits.
D) Calculate his economic profits.
In the isoquant/isocost diagram to the right, suppose that the firm is producing 1,000 units of output at
point A using 100 units of labor and 200 units of capital. As an outside consultant, what actions would
you suggest to management to improve profits?
The firm can cut costs by hiring more
and less
Units of capital (K)
300-
250-
A
200-
150-
100-
50-
B
q = 1,000
0
50
100
150 200
250
300
Units of labor (L)
Q
☑
Chapter 6 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 6.2 - Prob. 1TTACh. 6.2 - Prob. 2TTACh. 6.2 - Prob. 1MQCh. 6.2 - Prob. 2MQCh. 6.3 - Prob. 1TTACh. 6.3 - Prob. 2TTACh. 6.3 - Prob. 1MQCh. 6.3 - Prob. 2MQCh. 6.4 - Prob. 1TTACh. 6.4 - Prob. 2TTA
Ch. 6.5 - Prob. 1MQCh. 6.5 - Prob. 2MQCh. 6.5 - Prob. 3MQCh. 6.6 - Prob. 1TTACh. 6.6 - Prob. 2TTACh. 6.7 - Prob. 1MQCh. 6.7 - Prob. 2MQCh. 6.7 - Prob. 3MQCh. 6.7 - Prob. 4MQCh. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 9RQCh. 6 - Prob. 10RQCh. 6 - Prob. 6.1PCh. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Prob. 6.4PCh. 6 - Prob. 6.5PCh. 6 - Prob. 6.6PCh. 6 - Prob. 6.7PCh. 6 - Prob. 6.8PCh. 6 - Prob. 6.9PCh. 6 - Prob. 6.10P
Knowledge Booster
Similar questions
- Business Week, in an article dealing with management, wrote, "When he took over the furniture factory three years ago ... [the manager] realized almost immediately that it was throwing away at least $100,000 a year worth of wood scrap. Within a few weeks, he set up a task force of managers and workers to deal with the problem. And within a few months, they reduced the amount of scrap to $7,000 worth [per year]." Was this necessarily an economically efficient move? Explain your answer.arrow_forwardManisha could work for another firm making $10,000 per month, but she decides to open her own gourmet cheese store and pay herself $2,000 per month. In her first month of operations, she spends $6,000 on cheese, $1,000 on other items, and $2,500 on rent. She had a great opening month, and brought in revenues of $14,500. According to her accountant, what are Manisha's profits?arrow_forwardGive typing answer with explanation and conclusion Indy runs a small pet shop. He pays one employee $42,000 per year and spends $60,000 on pets and supplies to sell. He has his own funds tied up in running the company; those funds could earn him $6,000 per year if invested elsewhere. He pays rent of $24,000 per year for his shop space. Indy has been offered a job at a competing pet store for a wage of $44,000 per year. He values his forgone?arrow_forward
- Plot an Isocost line for a firm that is spending $10,000 on labor and capital. Then, draw a Cobb-Douglas Isoquant for this firm that intersects your Isocost curve. Label the two intersection points A and B. Draw a second Isosquant that is just tangent to the Isocost curve, and label the point of tangency point C. Explain why it would not be efficient for this firm to produce at point A nor point B.arrow_forwardLauren runs a chili restaurant in San Francisco. Her total revenue last year was $110,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and her materials, food and other variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates her implicit costs as A) $110,000. B) $50,000. C) $63,000. D) $150,000.arrow_forwardJoe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand. Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and his total revenue is $15,000 a year. Joe spent $1,000 on equipment and used his credit card to buy it. The interest on a credit card balance is 20 percent a year. At the end of the year, Joe was offered $500 for his business and its equipment. Calculate Joe's opportunity cost of production and economic profit.arrow_forward
- How does Japanese perfectionism affect the numbering of the isoquants in the Edge-worth—Rowley production boxarrow_forwardNoel's sandwich shop incurs these costs while in business: $6,000 in wages, $2000 on leasing equipment; $3,000 on leasing the building; $2,000 on food, and $1,000 on utilities. All of these costs, with the exception of leasing costs on equipment and the building, can vary, depending on how many sandwiches Noel sells. What is the sunk cost for this sandwich shop?arrow_forwardThe graph below shows a firm's isoquant for output q = 30. Initially the firm produces at point A, where it employs 20 units of physical capital ("machines") and 45 workers. 90 K 80 70 60 50 40 30 20 10 0 0 10 20 30 40 50 60 70 80 90 The firm must pay $6 for each unit of physical capital it uses, and it pays $24 for each unit of labor it employs. a. Draw the firm's isocost line through point A. b. Calculate the firm's total production cost and its average total cost at point A. Show your work. c. Given the costs of capital and labor, how can we tell that point A is not the long-run profit-maximizing input mix for the firm when it produces 30 units of output? Starting at point A, does the firm want to use more labor or more capital? Explain. d. What would be the firm's long-run optimal input mix, given that it produces 30 units of output? (You might not be able to identify the optimal mix exactly, but use the graph to estimate it as best you can.) Mark the optimal input mix as point B…arrow_forward
- The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. When the firm uses 120 units of labor, what is its marginal cost at this output?arrow_forwardSuppose Marcus produces chocolate with two inputs: factory and labour. The rent of the factory is $3,000 per week, and the wage of each worker is $2,000 per week. When Marcus produces 200 pounds of chocolate every week, he employs 2 workers. Calculate the fixed cost (FC), variable cost (VC), total cost (TC), average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC) of producing 200 pounds of chocolate. The total cost of producing 201 pounds of chocolate is $7030. Calculate the marginal cost (MC) of producing the 201st pound of chocolate.arrow_forwardAt what output does the firm reach minimum average variable cost? Multiple Choice 100 600 80 6,000 8,000 Darrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning