Draw the marginal-cost and average-total-cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do.

You are thinking about setting up a lemonade stand. The stand itself costs $200. The ingredients for each cup of lemonade cost$ 0.50.

What is your fixed cost of doing business? What is your variable cost per cup?

You are thinking about setting up a lemonade stand. The stand itself costs $200. The ingredients for each cup of lemonade cost$0.50.

What is your fixed cost of doing business? What is your variable cost per cup?

Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn.

Draw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit.

Draw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs..

One of the largest changes in the economy over the past several decades is that technological advances have reduced the cost of making computers. a. Draw a supply-and-demand diagram to show what happened to price, quantity, consumer surplus, and producer surplus in the market for computers. b. Forty years ago, students used typewriters to prepare papers for their classes; today they use computers. Does that make computers and typewriters complements or substitutes? Use a supply-and-demand diagram to show what happened to price, quantity, consumer surplus, and producer surplus in the market for typewriters. Should typewriter producers have been happy or sad about the technological advance in computers? c. Are computers and software complements or substitutes? Draw a supply-and-demand diagram to show what happened to price, quantity, consumer surplus, and producer surplus in the market for software. Should software producers have been happy or sad about the technological advance in computers? d. Does this analysis help explain why software producer Bill Gates is one of the world’s richest men?

You are thinking about setting up a lemonade stand. The stand itself costs $200. The ingredients for each cup of lemonade cost$0.50. a. What is your fixed cost of doing business? What is your variable cost per cup? b. Construct a table showing your total cost, average total cost, and marginal cost for output levels varying from 0 to 10 gallons. (Hint: There are 16 cups in a gallon.) Draw the three cost curves.

Give an example of an opportunity cost that an accountant might not count as a cost. Why would the accountant ignore this cost?

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?

Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn.

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 each sentence: a. What you give up for taking some action is called the _____. b. ______ is falling when marginal cost is below it and rising when marginal cost is above it. c. A cost that does not depend on the quantity produced is a(n) ______. d. In the ice-cream industry in the short run, _______ includes the cost of cream and sugar but not the cost of the factory. e. Profits equal total revenue minus ______. f. The cost of producing an extra unit of output is the _______.

Assume that the gold-mining industry is competitive.

Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine.

Define economies of scale and explain why they might arise. Define diseconomies of scale and explain why they might arise.