Chapter 22: Q. 22.4LO (page 486)
Describe the long-run cost curves a typical firm faces and define a firm's minimum efficient scale
No costs are fixed within thelong term.
A corporation can produce its product cheaply enoughto supply it at a competitive price.
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In Problem 22-20, if the firm were to employ the 8th unit of labour and produce 380 units of output, what would be the average variable cost and the marginal cost?
Consider Figure 22-6. Suppose that the current scale of output for a typical firm facing this LAC curve, which applies to all firms in this industry, is between points A and B, at about 500 units per period. If a new firm entering the industry desires to produce at the minimum efficient scale, would it wish to produce 10 units per period, 500 units per period, or 1,000 units per period? Explain.
During autumn months, passenger railroads across the globe deal with a condition called slippery rail. It results from a combination of water, leaf oil, and pressure from the train's weight, which creates a slippery black ooze that prevents trains from gaining traction.
a. One solution for slippery rail is to cut back trees from all of a rail firm's rail network on a regular basis, thereby helping to prevent the problem from developing. If incurred, would this railroad expense be a better example of a fixed cost or a variable cost? Why?
b. Another way of addressing slippery rail is to wait until it begins to develop. Then the company purchases sand and dumps it on the slippery tracks so that trains already enroute within the rail network can proceed. If incurred, would this railroad expense be a better example of a fixed cost or a variable cost? Why?
Suppose that a firm's only variable input is labor. The firm increases the number of employees from four to five, thereby causing weekly output to rise by two units and total costs to increase from per week to per week.
a. What is the marginal product of hiring five workers instead of four?
b. What is the weekly wage rate earned by the fifth worker?
At its current short-run level of production, a firm's average variable costs equal per unit, and its average fixed costs equal per unit. Its total costs at this production level equal
What is the firm's current output level?
What are its total variable costs at this output level?
What are its total fixed costs?
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