Question

Econ Review Unit 4: Behind the Supply Curve: Profit, Production, and Costs ine Nature and Function of Product Markets Chapters: 21 & 22 Multiple Choice Vanabinou ed input ouantity of Output (MP of Variable input 16.) In Exhibit 7-4, the numbers that go in blanks C and Dare, respectively a) 18.16 b) 2016 c) 40. 184 d) 20.22 .) none of the above 17.) If, in the production process, inputs are increased by 18 percent and output increases by more than 18 percent a) b) c) d) e) economies of scale are said to exist diminishing marginal returns are said to exist diseconomies of scale are said to exist constant returns to scale are said to exist none of the above Complete the table: 18.) To start up a small part time business assume your only costs are paying $100 for equipment and paying each employee you hire $20. Based on the previous information complete the following table and answer the questions that follow You must out the table or I will not accept your answers L Q TFC TVC TCMC AFC AVC ATC TP MP AP 000000 0 0 2 25 a.) If you decide to hire 3 employees what will TFC be equal to? b) If you decide to hire 4 employees what wil TVC be equal to? c) you decide not to hire any employees what wil TC be equal to? d.) If you decide to hire 4 employees what will MC be equal to? e) if you decide to hire 3 employees what wil AFC be equal to? 1) If you decide to hire 2 employees what will AVC be equal to? 9) If you decide to hire 1 employee what will ATC be equal to? h) you decide to hire 4 employees what will TP be equal to? If you decide to hire 1 employee what will MP be equal to? 1) you decide to hire 2 employees what will AP be equal to? 7 of 5

Answer 1

Q	MP = Change in TP
0	-
40	40
62	22
80	18
96	16

16. The value of C and D is 18,16 respectively. Hence,option(A) is correct.

17. If inputs are increased by 18 percent and output increases by more than 18 percent , this implies that economies of scale are said exist. Hence,option(A) is correct.

18.

L	Q	TFC=$100 (given)	TVC= $(20)L	TC=TFC+TVC	MC=(Change in TC/Change in Q)	AFC=TFC/Q	AVC=TVC/Q	ATC=TC/Q	TP= (Q)	MP=(Change in TP)	AP=TP/L
0	0	100	-	100	0	0	0	0	0	0	0
1	10	100	20	120	2	10	2	12	10	10	10
2	25	100	40	140	1.33	4	1.6	5.6	25	15	12.5
3	33	100	60	160	2.5	3.03	2.72	4.84	33	8	11
4	37	100	80	180	5	2.70	2.16	4.86	37	4	9.25