SOLVED

11) Refer to Table 8-3. What is the variable cost of production when the firm produces 115 lanterns? A) $1,556 B) $1,157 C) $956 D) $10.05 12) Refer to Table 8-3. What is the average total cost of production when the firm produces 120 lanterns? A) $1,680 B) $72 C) $14 D) $12.3 13) Refer to Table 8-3. What is the average variable cost per unit of production when the firm produces 90 lanterns? A) $490 B) $33.67 C) $7.67 D) $5.44 14) Refer to Table 8-3. What is the marginal cost per unit of production when the firm produces 100 lanterns? A) $420 B) $32 C) $11.1 D) $8.1 15) Refer to Figure 8-4. Identify the curves in the diagram. A) E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve B) E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve C) E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal cost curve D) E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve. 16) Refer to Figure 8-4. The vertical difference between curves F and G measures A) average fixed costs. B) marginal costs. C) fixed costs. D) sunk costs. 17) Refer to Figure 8-4. Curve G approaches curve F because A) marginal cost is above average variable costs. B) average fixed cost falls as output rises. C) fixed cost falls as capacity rises. D) total cost falls as more and more is produced. 18) If the marginal cost curve is below the average variable cost curve, then A) average variable cost is increasing. B) average variable cost is decreasing. C) marginal cost must be decreasing. D) average variable cost could either be increasing or decreasing. 19) If the average variable cost curve is above the marginal cost curve, then A) marginal costs must be decreasing. B) average variable costs must be increasing. C) marginal costs must be increasing. D) marginal costs can be either increasing or decreasing. 20) Average total cost is equal to average variable cost minus average fixed cost. 21) As output increases, average fixed cost gets smaller and smaller. 22) As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost? 23) Suppose the total cost of producing 40,000 flash drives is $120,000, and the fixed cost is $30,000. a.What is the variable cost? b.When output is 40,000, what are the average variable cost and the average fixed cost? c.Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain. a.Variable cost = total cost – fixed cost. So, $90,000 = $120,000 – $30,000. b.AVC = VC/Q = $90,000/40,000 = $2.25. AFC = FC/Q = $30,000/40,000 = $0.75 c.The gap must get smaller as output rises because ATC = AVC + AFC, and AFC falls as output rises. So, the dollar difference between ATC and AVC is greater when the output of flash drives is 40,000. 24) Explain how the listed events (a-d) would affect the following at Hilton Hotels. a.Hilton decides on an across-the-board 5 percent increase in executive salaries. b.Hilton decides to eliminate all print advertising. c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers. d.The federal government starts to levy a $5 room tax on all hotel rooms. a.Average fixed cost and average total cost will decrease; marginal cost and average variable cost will be unaffected. b.Average fixed cost and average total cost will increase; marginal cost and average variable cost will be unaffected. c.Marginal cost, average variable cost and average total cost will increase; average fixed cost will be unaffected. d.Marginal cost, average variable cost and average total cost will increase; average fixed cost will be unaffected.