. The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $20,000), and, after setting up, you
. The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $20,000), and, after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $5,000). : Assume QQ denotes the quantity produced of a particular design. Which of the following best represents the average cost function for producing any single design? AC=$20,000+$5AC=$20,000+$5 AC=$20,000Q+$5AC=$20,000Q+$5 AC=$20,000+$5,000AC=$20,000+$5,000 AC=$20,000+$5QAC=$20,000+$5Q Based on this information, production in any one single design (Exhibits or doesn’t exhibits) economies of scale? 2. Under constant returns to scale, average cost ( ?) as the quantity produced increases. Over this range of output, the marginal cost curve is ( ) the average cost curve. 3. Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your marginal cost decreases by $8. There are no fixed costs, and the first unit costs you $64 to produce. Quantity Marginal Cost Total Cost Average Cost 1 $64 $64 $64 2 3 4 5 6 Suppose you receive a request for proposal (RFP) on a project for three units. Your break-even price for three units is: $ Suppose that if you get the contract, you estimate that you can win another project for two more units. The break-even price for those next two units alone is: $ 4.The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $26, $14, $10, $5, and $3 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $10, $14, $26, $34, and $42 (one buyer at each price). Price Quantity Demanded Quantity Supplied $3 $5 $10 $14 $26 $34 $42 In this market, the equilibrium price will be (?) per widget, and the equilibrium quantity will be widgets. 5.Suppose that due to the outbreak of a new flu, known as H14N9, the demand for hand sanitizer has tripled. Smith & Smith, a company that produces and sells hand sanitizer, should production of its hand sanitizer. Suppose there is no vaccine for H14N9, and that a vaccine will not be developed for several decades. True or False: Smith & Smith should increase its productive capacity by leasing new plant and equipment? True False 6.I Change Demand Curve Shift Direction of Shift A decrease in the price of a substitute product ( ) ( ) 7.Suppose that on Valentine’s Day, the demand for both roses and greeting cards increases by the same percentage amount. However, the price of roses increases by more than the price of greeting cards. Based on this information, you can conclude that the supply of roses is sensitive to price than the supply of Valentine’s cards. 8.Distributors of beer earn some monopoly profits in their local markets but see them slowly erode as substitutes enter the market. Suppose Nebraska has scheduled a vote on the legalization of marijuana. Additionally, suppose that marijuana and beer are substitutes and that the legalization of marijuana would lead to a decrease in the price of marijuana. Given the relationship between marijuana and beer, the legalization of marijuana would lead to in demand for beer. Thus, distributors of beer would likely the legalization of marijuana. 9.Relative to managers in more industries, managers in more industries are more likely to spend their time on pricing strategies rather than on reducing costs. 10.Describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach the long-run equilibrium? In the short run, both monopolists and competitive firms earn positive economic profits. In the long run, can earn a positive economic profit. True or False: The adjustment to long-run equilibrium takes the same amount of time for monopolies and competitive industries? True False
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