Eco 217 Extra points Part II

Eco 217Extra pointsPart IIDate: _________________________Student Name: ____________________________________All underlying work must be shown to receive full creditA. Econman has been infected by the free enterprise bug. He sets up a firm on extraterrestrial affairs. Therent of the building is $4,000, the cost of the two secretaries is $40,000, and the cost of electricity and gascomes to $5,000. There is great demand for his information, and his total revenue amounts to $100,000.By working in the firm, Econman forfeits the $50,000 he could earn by working for the Friendly SpaceAgency and the $4,000 he could have earned as interest rate had he saved his funds instead putting themin his business.1. The accounting cost of Econman’s business is:a. $ 90,000b. $49,000c. $150,000d. $94,0002. The implicit cost of Econman’s business is:a. $100,000b. $54,000c. $103,000d. $50,0003. The total cost of Econman’s business is:a. $103,000b. $15,000c. $94,000d. $109,0004. Is he making a profit or loss by an accountant’s definitions of profit and loss?a. profit, $51,000c. loss; $3,000b. loss; $9,000d. profit; $46,0005. Is he making profit or loss by an economist’s definition?a. profit; $ 41,000b. loss; $3,000c. profit; $50,000d. loss, $46,0006. What is the minimum in total revenue Economan must make in his business to just make itworthwhile?a. $150,000b. $ 46,000c. $103,000d. $54,000B. You own four firms that produce different products. The following table summarizes the conditions ineach firmFirmABCDP11348MR8125TRQ20100TC2001070200MC51.525ATC2.57AVC9256After calculating the missing numbers for each firm, make one of the following four decisions regardingoperations in each firm.7. Which firm should continue producing the same level of output in the short-run?a. Firm Bb. Firm Cd. Firm Ad. Firm Dc. Firm Dd. Firm B8. Which firm should shut down in the short-run?a.. Firm Ab. Firm C9. Which firm should increase its output to maximize profit in the short-run?a. Firm Bb. Firm Dc. Firm Ad. Firm C10. Which firm should decrease its output to maximize profit in the short-run? Why?a. Firm Bb. Firm Ac. Firm Cd. Firm DC. These are the cost curves for a perfectly competitive firm. All underlying work involving costs,revenues or profits must be shown$SM CA TCP r i c e a n d c o s t (d o ll a r s )5AVC4321q0100200300400500600700800The market price is $511. If market price of product is $5, the firm produces _______ units to maximize profitsa. 700b. 500c. 600d. 55012. The firm earns total revenue of $ ___________ and the firm’s total cost at the profit maximizing levelof output is $ ___________a. $3,000.; $2,400b. $2,500; $2,000c. $3,500, $2,400d. $2,500, $2,50013. The firm makes a total profit (loss) of $________a. $5,00b. $600c. $900d. $0The price of product is $314. The firm produces at the price of $3 produces ________ units.a. 600b. 300c. 500d. 40015. The firm earns total revenue of $ __________ and its total cost is $ ____________ and it earns totalprofit /loss of $_____________a. $2,000, ; $1,600 ; $400c. $1,500, (-$700)b. $2,400, ;$2,000,; $400d. $1,200, $1600, (-$ 400)16. The firm’s total revenue at the price of $3 covers all its variable cost, and the firm has___________________ left to pay its ___________a. $400, variable costsb. $200, fixed costsc. $400, total costsd. $100, variable costs17. If the firm shuts down and the price of $3, its total loss would be an amount equal to$______a. $600b. $400c. $1,000d. $1,20018. In the long-run equilibrium, product price equals to_______ thus, economic profit equals $_____,however, firms have no incentive to exit the industry because each firm earns enoughrevenue to cover _________ costs and pay its owner an amount equal to_______, therefore accountingprofit is ____________a. $2.50; $700; fixed; explicit, $700b. $3; -$200, variable, implicit, -$200b. $4 ; $0; explicit ; implicit; positivec. $3.50, $0; implicit, explicit, zeroD. Use the following to answer questions. Show all underlying work to earn full credit.20181614121086420M CATCDM RO u tp u t p e r d a y19. Refer to the graph above. A profit-maximizing monopolist would produce______ units, andcharge price per unit $______, the profit maximizing level of output would be produced in__________a. 700; 18; increasing marginal returnsc. 900, $14 ; decreasing marginal returnsb. 600; $17 ; decreasing marginal returnsd. 950, $14; increasing marginal returns20. Refer to the graph above. The firm will earn total revenue of $ _______ and its total cost at theprofit maximizing output would be ___________a. $12,600; $9,200c. $12,600 , $ 10,170b. $10,200; $$7,800d. $13,300; $12,35021. Refer to the graph above. A profit-maximizing monopolist would earn total profit /lossof______ and should expect in the long-run __________a. $3,400; entryb. $-1,140; exitb. $2,400; earn profitd.-$1,150, shutdown22. Refer to the graph above. If this industry were perfectly competitive, the competitive equilibriumprice $________ and quantity would be________; the deadweight-loss would be $____________a. $14; 850;$0b. $17, 900, $1,400c. $16; 800 ; $500d. $14; 900; $25023. If the government agency would regulate the firm and the industry above according to the sociallyoptimal price, the firm would charge the price of_______ would produce _______units, and market efficiency would( increase/decrease) by $__________a. $14; 850; increase by $875c. $16; 800 ; increase by $3,500b. $17, 900, reduced by $7,500d. $14; 900; $250 ; reduce by $3,250E. The table below shows the demand and cost data facing “Velvet Touches” a monopolisticallycompetitive producer of velvet throw pillows. Use the data to answer the following questionsQ12345678Price3028262422201816TRMRTotal Cost324353647690106126Marginal Cost24. What is the profit maximizing level of output and price for the Velvet Touches?a. 4 ; $ 24b. 7, $18c. 5; $22d. 3, $2625. The firm total profit/loss at the profit maximizing output is $______a. ( -$ 25)b. $34c.$56d. (-$ 8)26. If the Velvet Touches fixed cost increases by $10, the profit maximizing level of output will be________units the firm will charge price of $_______. The firm will earn profit/loss of $__________and in the long-run should expect ____________a. 5, $22, $34; shutdownc. 5, $22, $24; entryb. 4, $24, $32; exitd. 6, $20, $30; entry27. In the long-run the firm demand curve will become ________ elastic and the firm will earn profit/lossof $_________, the industry output ____________a. less ; $34, increasesb. more; $0; increasesc. more, $0, decreases d. less, $10, decreasesF. The Morrison Company produces tennis rackets, the marginal cost of a racket being $20. Sincethere are many substitutes for the firm’s rackets, the price elasticity of demand for its racketsequals about -2.0. In the relevant range of output, average total cost is very close to marginal cost.28. What price does the company charge per racket?a. $20b. $10c. $40d. $229. Because of the heightened competition, the price elasticity of demand for the firm’s tennis racketsincreases to -3.0. What price should the company charge per racket?a. $20d. $40b. $30c. $60



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