Chapter 12

Problem 4

Marginal Product Total Cost Average Total Cost Marginal Cost 200
20 300 15.00 5.00
30 400 8.00 3.33
40 500 5.56 2.50
30 600 5.00 3.33
20 700 5.00 5.00
10 800 5.33 10.00
5 900 5.81 20.00

A. Marginal product would rise, and then it would drop because of fading marginal returns. B. See above on the total cost column. C. Average total cost is U shaped at lower rates of output Average total cost decreases as output inflates; at complex rates of output, Average total increases as output enlarges. D. Marginal Cost would decrease, but then increase, and it would rise sooner and faster than average total cost. E. Marginal product would be rising, marginal cost is decreasing; once marginal product is decreasing, marginal cost is increasing.

Problem 10

-Firm A has economies of scale because average total cost decreases as output rises.
-Firm B has diseconomies of scale because average total cost increases as output increases.
-Firm C has economies of scale from one to three units of output and diseconomies of scale for levels of output past three units.

Chapter 13

Problem 3
280-30=250
270-280=-10 loss
In the short run, Bob should not shut down. In the long run, Bob should exit the industry.

Problem 4
A.
40-19=21
48-27=21
The firm should generate 5 or 6 units to maximize profit Total revenue minus total cost is the largest at both 5 and 6.

Chapter 14

Problem 4 A. The profit maximizing price would be $4 and the output would be 400, ending it would be 1600 thousand dollars. If they would decrease the price to 3 and allowed 500. B. The company should not build the bridge because the profit they could make is 1,600,000 and the cost would be 2,000,000. It would result in a 400,000 loss.

Problem 10 A. 1000-20Q=100+10Q
900=30Q
Q=30