A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

What is the marginal product of each hour spent fishing?

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

Use these data to graph the fisherman's production function. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{array}{lc} & \text{Quantity of Fish} \\ \text{Hours} & \text{ (in pounds) } \\ \hline 0 \text{ hours } & 0 \text{ lb } \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array}$$

a. What is the marginal product of each hour spent fishing?

b. Use these data to graph the fisherman's production function. Explain its shape.

c. The fisherman has a fixed cost of $\$ 10$ (his pole). The opportunity cost of his time is $\$ 5$ per hour. Graph the fisherman's total-cost curve. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

Use these data to graph the fisherman’s production function. Explain its shape.

The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of$1 per burger, paid by producers of hamburgers. a. Which of the following curves—average fixed cost, average variable cost, average total cost, and marginal cost—would shift as a result of the lump-sum tax? Why? Show this in a graph. Label the graph as precisely as possible. b. Which of these same four curves would shift as a result of the per-burger tax? Why? Show this in a new graph. Label the graph as precisely as possible.

The city government is considering two tax proposals:

• A lump-sum tax of $\$ 300$ on each producer of hamburgers.
• A tax of $\$ 1$ per burger, paid by producers of hamburgers.

Which of these same four curves would shift as a result of the per-burger tax? Why? Show this in a new graph. Label the graph as precisely as possible.

You are the chief financial officer for a firm that sells digital music players. Your firm has the following average-total-cost schedule:

$$\begin{array}{lc} \text{ Quantity } & \text{ Average Total Cost } \\ \hline 600 \text{ players } & \$ 300 \\ 601 & 301 \end{array}$$

Your current level of production is $600$ devices, all of which have been sold. Someone calls, desperate to buy one of your music players. The caller offers you $\$ 550$ for it. Should you accept the offer? Why or why not?

This chapter discusses many types of costs: opportunity cost, total cost, fixed cost, variable cost, average total cost, and marginal cost. Fill in the type of cost that best completes the following sentence:

Profits equal total revenue minus _____.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her$50,000 per year job as an accountant.

Define opportunity cost

Compare the following two pairs of goods:

• Coke and Pepsi
• Skis and ski bindings

In which case do you expect the indifference curves to be fairly straight? In which case do you expect the indifference curves to be very bowed?

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

The fisherman has a fixed cost of $10 (his pole). The opportunity cost of his time is$5 per hour. Graph the fisherman’s total-cost curve. Explain its shape.

Compare the following two pairs of goods:

• Coke and Pepsi
• Skis and ski bindings

In which case will the consumer respond more to a change in the relative price of the two goods?

Buffy is thinking about opening an amulet store. She estimates that it would cost $\$ 350,000$ per year to rent the location and buy the merchandise. In addition, she would have to quit her $\$ 80,000$ per year job as a vampire hunter.

a. Define opportunity cost.

b. What is Buffy's opportunity cost of running the store for a year?

c. Buffy thinks she can sell $\$ 400,000$ worth of amulets in a year. What would her accountant consider the store's profit?

d. Should Buffy open the store? Explain.

e. How much revenue would the store need to generate for Buffy to earn positive economic profit?

Jennifer divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Jennifer's budget constraint.

b. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.