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Economics 2301 Assignments 5 and 6. Tony Lima. Chapter 7, Q. 2. Ch. 7, Q. 2 answer. The opportunity cost of capital is 7% of $1 million or $70,000. Ted ’ s economic profit is $250,000 - $70,000 = $180,000. Chapter 7, Q. 6 part a. Ch. 7, Q. 6 part a answer.
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Economics 2301Assignments 5 and 6 Tony Lima
Ch. 7, Q. 2 answer • The opportunity cost of capital is 7% of $1 million or $70,000. • Ted’s economic profit is $250,000 - $70,000 = $180,000
Ch. 7, Q. 6 part a answer • This question is simply the definition of diminishing returns. • The correct answer is C.
Ch. 7, Q. 6 part b answer • Diminishing returns begin with the third worker because MPL declines from 12 to 6. • The correct answer is E.
Ch. 7, Q. 7 part a answer Technology A is lower cost for all levels of output.
Ch. 7, Q. 7 part b answer Technology B is lower cost for all levels of output.
Chapter 7, Q. 8 answer The trick here is to recognize that AVC must be the same.Since the slower worker only produces 4 sweaters, TVC willbe $76. That means there will be $76 - $50 - $15 = $11available to pay that worker.
Chapter 8, Q. 1 answer • Fixed costs are the monthly payment and insurance. These costs will stay the same even if the owner does not drive at all. • Variable costs are gas and wear and tear.
Chapter 8 Q. 8 answer At P = $3.50, the firm will not use machine 3 because MC > P.
