Economic: Total Cost
Review Question #3
Principles of Microeconomics
Spring 2010
1. Your cousin Vinnie owns a painting company with fixed costs of $200 and the schedule for variable costs as below. What is the efficient scale of the painting company? Quantity of Houses Painted per Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Variable Costs | $10 | $20 | $40 | $80 | $160 | $320 | $640 |
2. Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store?
3. What you give up for taking some action is called the ______. Fill out the blank and explain the statement.
4. ______ is falling when marginal cost is below it and rising when marginal cost is above it. Fill out the blank and explain the statement.
5. A cost that does not depend on the quantity produced is a ______. Fill out the blank and explain the statement.
6. In the ice-cream industry in the long run, ______ includes the cost of cream and sugar but not the cost of factory. Fill out the blank and explain the statement.
7. Profit equal total revenue less ______. Fill out the blank and explain the statement.
8. The cost of producing an extra unit of output is the ______. Fill out the blank and explain the statement.
9. A firm has fixed cost of $100 and average variable cost of $5Q, where Q is the number of units produced. What is the efficient scale of this firm?
10. Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. At what price would Bob temporarily shut down his business?
11. Consider total cost and total revenue given in the following table. At what level of quantity does
Principles of Microeconomics
Spring 2010
1. Your cousin Vinnie owns a painting company with fixed costs of $200 and the schedule for variable costs as below. What is the efficient scale of the painting company? Quantity of Houses Painted per Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Variable Costs | $10 | $20 | $40 | $80 | $160 | $320 | $640 |
2. Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store?
3. What you give up for taking some action is called the ______. Fill out the blank and explain the statement.
4. ______ is falling when marginal cost is below it and rising when marginal cost is above it. Fill out the blank and explain the statement.
5. A cost that does not depend on the quantity produced is a ______. Fill out the blank and explain the statement.
6. In the ice-cream industry in the long run, ______ includes the cost of cream and sugar but not the cost of factory. Fill out the blank and explain the statement.
7. Profit equal total revenue less ______. Fill out the blank and explain the statement.
8. The cost of producing an extra unit of output is the ______. Fill out the blank and explain the statement.
9. A firm has fixed cost of $100 and average variable cost of $5Q, where Q is the number of units produced. What is the efficient scale of this firm?
10. Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. At what price would Bob temporarily shut down his business?
11. Consider total cost and total revenue given in the following table. At what level of quantity does