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Short- and Long-Run Cost Functions

total fixed cost structure

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the competes with The Wall Street Journal, USA Today, and The New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, sporting events, and so on. The El Dorado Star faces the rev

Federal Reserve and the Sale of Bonds

If the Federal Reserve were to sell bonds, what would likely happen to the money supply and interest rates? Carefully Explain (the money market graph would help). Using the AS/AD model what do you predict will happen to the level of Real GDP and the Price level in the U.S. in the Short-Run and Long-Run? Carefully Explain (a g

Profit Maximization Short-Run Demand

A firm has the following short-run demand and cost schedule for a particular product: Q=100+2P and Total Cost (TC)=200+2Q. a. Determine the firm's profit-maximizing Quantity Q, Price P, and economic profits or losses. b. If this firm operates in a monopolistically competitive market, what will happen in the long-run to Q

traditional & new Keynesian theory

Both traditional & new Keynesian theory indicate that the short run aggregate supply is horizontal. a) in terms of their short run implications for the price level & real GDP, is there any difference between the two approaches? Same short run implications Different short run implications b)In the terms of the

Short-Run Average and Total Cost

True or False? Please explain your reasoning. a. The short-run average total cost can never be less than the long-run average total cost. b. The short-run average variable cost can never be less than the long-run average total cost. c. In the long run, choosing a higher level of fixed cost shifts the long-run average total

Economics questions

1. If nothing else changes, an increase in fixed cost will A.decrease the break-even quantity point B.increase the break-even quantity point C.will have no effect on the break-even point D.may either increase or decrease the break-even point 2. The degree of operating leverage can be defined as A.the change in profit for

Short Run/Long Run Cost

You read a story in the newspaper about the "economy of mass production". This means that a. total cost is less a larger levels of production b. long run average costs is less at larger levels of production c. marginal cost is less at larger levels of production d. fixed cost is less at larger levels of production

Short Run

In the short run, shouldn't one produce as long as fixed costs are being covered? I'm confused on this. WHich costs should you be concerned with for the short run? fixed, total, average variable, overhead, average fixed? there are so many.

Short Run

11. How long is the "short-run" time period in the economic analysis of the market? a. three months or one business quarter b. total time in which sellers already in the market respond to changes in demand and equilibrium price c. total amount of time it takes new sellers to enter the market d. total

Principles of Microeconomics

Suppose, after graduation, you take a job in a factory in Chile that produces faux leather shoes. One day, your boss comes in and says, "this factory isn't operating at a profit and so we can minimize our losses by closing up shop." Yikes! You didn't think you'd lose your job that quickly. Your boss continues talking and states

Long-Run Average-Cost Curve

As a kid, you recorded the costs of your Kool-Aid stand and drew your long-run average-cost curve. Now you work in a video chip factory. Would you expect any similarities IN SHAPE between the kool-aid cost curve and the long-run average cost curve for the chip factory? Would you expect any differences? Question requires specific

Short Run/Long Run

Suppose, after graduation, you take a job in a factory in Chile that produces faux leather shoes. One day, your boss comes in and says, "this factory isn't operating at a profit and so we can minimize our losses by closing up shop." Yikes! You didn't think you'd lose your job that quickly. Your boss continues talking and states

Short run fixed costs

Will a firm shut down in the short run if it is losing money, even though it can cover its fixed costs? Explain why this is true or false and include graph(s).

Price Discrimination

Some charge that third degree price discrimination is unfair or that it reduces social welfare. Why does charging one group a lower price hurt anyone? Please explain. b. McDonald's charges a higher price for a Big Mac in New York City than it does in a small town in Iowa. Is this an example of third degree price discrimin

Value of Marginal Productivity

Assume a firm employs 10 workers and pays each $15 per hour. Further assume that the MP of the 10th worker is 5 unit of output and that the price of the output is $4. In the short run should the firm a. Hire additional workers b. Reduced the amount of workers employed c. Continue to employ 10 workers


Please help with the following problem. In mid-1968, the government imposed a 10% income tax surcharge on personal and corporate income to pay for the costs of the Vietnam War. It was widely believed that the surcharge was temporary, and in fact it was removed in mid-1970. Based on the permanent income hypothesis, what would


Suppose that Panasonic Electronics (maker of phones) and MCI (long distance telephone services) decide to merge. What argument would tell the United States Justice Department that it may be socially beneficial for the merger to take place?

Market power, price discrimination

Airline flies only one route. Demand for each flight is Q=500-P. Cost of running each flight is $30,000 plus $100 per passenger. a. What is the profit maxmizing price the airline will charge. b. How many people will be on each flight. c. What is the profit for each flight. d. If fixed cost is $41000 instead of $30,000, wil

Short and Long Run Costs and Concept of Diminishing Returns

(Revised) Please be specific and detailed in answering each of the discussion questions below. (Note: Number of pages to answer all questions, if required, should be no more than 7 pages) Finally, please list my questions before each of your detailed responses so I can follow along with clarity. 1. Discuss in detail wh

Cost Curves: Example Problem

A firm's cost C is given in series as a function of output q=0,1,2,3,4,5,6,7,8,9,10 as C=50, 100, 140,170,190,210,230,260,300,350,410. Construct a table containing the above information and Total Variable Cost, Average Total Cost, Average Variable Cost and Marginal Cost. At price of 35, how many units will be produced in t

Marginal Product, Cost

If a company's only variable input is labor and 50 workers are used, the average product of labor is 50, the marginal product of labor is 75, the wage rate is $80 and the total cost of fixed input is $500, which is true? Average variable cost is rising marginal cost is rising average variable is lowering you can not

Short-run and Long-run weak demand

When demand is weak, the firm will have the option of shutting down in the short run. But what condition must be met for it to make sense for the firm to shut down? If this condition was met, how would the firm benefit by shutting down? Furthermore, what if the weak demand continued in the long run? What do you change about the


Please let me know if I did this correctly. Assignments: Elasticity As the Midwest regional manager for American Airlines, you have recently undertaken a survey of economy-class load factors (the percentage of economy-class seats that are filled with paying customers) on the Chicago-Columbus, Ohio route that you service

Elasticity of Demand for Drugs

Subject: Price theory Details: Consider the elasticity of demand for drugs. How does it affect the terms of this trade-off (talking about short run and long run gains from patents)? Can you explain why, if the elasticity of demand is low, the short-run allocative distortion associated with patent protection?the ?welfare burden