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.
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A. people's wants are plastic and easily manipulated by advertising. B. people often have self-control problems that make it difficult to figure out exactly what they do want and what is best for themselves. C. people sometimes need to be protected from themselves. D. people should be allowed to do whatever they want as long as no one else is hurt.
One reason stagflation is difficult to recover from is because:
A. less output requires less inputs to be hired. B. prices tend to adjust more quickly downward than upward. C. wages are sticky downward. D. input prices increase with output prices.
Game theory suggests that, in the absence of patents, the privately motivated innovation decisions of firms might lead to:
A. too much innovation. B. the socially efficient level of innovation. C. too little innovation. D. None of the answers is correct.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, a decrease in unemployment may be represented by the movement from
A. B to A. B. C to D. C. B to D. D. A to C.