Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises. a. Using diagrams, show what happens to the cost curves of an individual boat-making firm and to the market supply curve. b. What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?

Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises.

a. Using diagrams, show what happens to the cost curves of an individual boat-making firm and to the market supply curve.

b. What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. c. Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market.

You go out to the best restaurant in town and order a lobster dinner for $40. After eating half of the lobster, you realize that you are quite full. Your date wants you to finish your dinner because you can’t take it home and because “you’ve already paid for it.” What should you do? Relate your answer to the material in this chapter.

A competitive firm maximizes profit by choosing the quantity at which a. average total cost is at its minimum. b. marginal cost equals the price. c. average total cost equals the price. d. marginal cost equals average total cost.

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. a. Draw a diagram showing the average total cost, marginal cost, marginal revenue, and supply curve of the typical firm in the industry. b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. What happens to Hi-Tech’s profits and the price of books in the short run when Hi-Tech’s patent prevents other firms from using the new technology? c. What happens in the long run when the patent expires and other firms are free to use the technology?

A firm in a competitive market receives $500 in total revenue and has marginal revenue of$10. What is the average revenue, and how many units were sold?

Does a competitive firm’s price equal the minimum of its average total cost in the short run, in the long run, or both? Explain.

Ball Bearings, Inc. faces costs of production as follows:

$$\begin{array}{ccc} & \text{ Total } & \text{ Total } \\ & \text{ Fixed } & \text{ Variable } \\ \text{ Quantity } & \text{ Costs } & \text{ Costs } \\ \hline 0 & \$ 100 & \$ 0 \\ 1 & 100 & 50 \\ 2 & 100 & 70 \\ 3 & 100 & 90 \\ 4 & 100 & 140 \\ 5 & 100 & 200 \\ 6 & 100 & 360 \end{array}$$

The price of a case of ball bearings is $\$ 50$. Seeing that she can't make a profit, the Chief Executive Officer (CEO) decides to shut down operations. What are the firm's profits/ losses? Was this a wise decision? Explain.

Under what conditions will a firm exit a market Explain.

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.

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a. keep producing in the short run but exit the market in the long run. b. shut down in the short run but return to production in the long run. c. shut down in the short run and exit the market in the long run. d. keep producing both in the short run and in the long run.

Ball Bearings, Inc. faces costs of production as follows:

$$\begin{array}{ccc} & \text{ Total } & \text{ Total } \\ & \text{ Fixed } & \text{ Variable } \\ \text{ Quantity } & \text{ Costs } & \text{ Costs } \\ \hline 0 & \$ 100 & \$ 0 \\ 1 & 100 & 50 \\ 2 & 100 & 70 \\ 3 & 100 & 90 \\ 4 & 100 & 140 \\ 5 & 100 & 200 \\ 6 & 100 & 360 \end{array}$$

Calculate the company's average fixed costs, average variable costs, average total costs, and marginal costs at each level of production.

Jane's Juice Bar has the following cost schedules:

$$\begin{array}{lcc} \text { Quantity } & \text { Variable Cost } & \text { Total Cost } \\ \hline 0 \text { vats of juice } & \$ \quad 0 & \$ 30 \\ 1 & 10 & 40 \\ 2 & 25 & 55 \\ 3 & 45 & 75 \\ 4 & 70 & 100 \\ 5 & 100 & 130 \\ 6 & 135 & 165 \end{array}$$

Graph all three curves. What is the relationship between the marginal-cost curve and the average-total-cost curve? Between the marginal-cost curve and the average-variable-cost curve? Explain.