4. What effect would each of the following have on a firm's short-run marginal cost curve and its total fixed cost curve?

a. An increase in the wage rate
b. A decrease in the property tax
c. A rise in the purchase price of new capitol.
d. A rise in energy prices.

5. Suppose that a firm's cost per unit of labor is $100 per day and its cost per unit of capital is $400 per day.
a. Draw the isocost line for a total cost per day of $2000.
b. If the firm is producing efficiently, what is the marginal rate of technical substitution between labor and capital?
c. Demonstrate your answer to part (b) using isocost lines and isoquant curves.

4. Fixed costs (FC) are costs that do not vary with the quantity of output produced. Marginal cost (MC) = change in total cost / change in quantity, and slope of TC curve.

a. an increase in the wage rate increases variable cost. The amount of increase in variable cost (VC) will depend on the ...

Solution Summary

The solution does an excellent job in describing the impact of certain events on the cost curves. The solutions goes into some amount of detail when it comes explaining the direction of the impact. However, it is still concise and easy to understand. In the second attachment, the solution draws the isoquant and isocost curves as well. Brief explanation to that is provided as well. This is an excellent response for students looking for concise answers to the problem being asked. Overall, a fair response.

... 2. a) Why are short-run marginal cost curves expected to slope upward? b) If you know that average costs are increasing, is the marginal cost curve above or ...

... number of short-run average total cost curves. Such an envelope is base on identifying the point on each short-run average total cost curve that provides the ...

... Hence the demand curve D in effect resembles the Marginal Revenue curve. ... intersection point of Marginal Revenue (Demand) and Marginal Cost curves, which occurs ...

... The rightward shift in the supply curve would reduce the prices and increase the ... 1) Sketch the marginal cost and average cost curves 20 18 16 14 12 MC 10 AC 8 ...

... attachment) shows the cost curves for a perfectly competitive firm. Identity the shutdown point, the breakeven point, and the firm's short-run supply curve. ...

... QP = (P 6)/0.00025 Summing both curves, we get ... 14000 D. Determine the industry supply curve when P ... answer, calculate quantity at an industry price of $10 ...

... firm's short-run supply curve with q as a function of p, the market price. 3. A competitive firm has the following long-run total cost and marginal cost curves. ...