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University of Louisiana, Lafayette - ECON 528 Homework 2.

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Question 1
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Question 2
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Question 3
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Started on Monday, 28 January 2019, 9:05 AM
State Finished
Completed on Monday, 28 January 2019, 9:21 AM
Time taken 16 mins 17 secs
Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of
$40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close
friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time
assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is
the amount of her implicit costs?
Select one:
a. $70,000
b. $42,000
c. $80,000
d. $41,500
Accounting costs exclude implicit costs.
Select one:
a. True
b. False
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very
low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?
Select one:
a. The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue
operations is a marginal cost.
b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a
variable cost.
c. The variable cost of running the studio is $22,000.
d. The fixed cost of running the studio is $22,000.
ECON528-810_ECON528-010-201940

Question 4
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Marked out of 1.00
Question 5
Correct
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Table 11-7
Quantity of Lanterns Fixed Cost (dollars)
Variable Cost
(dollars)
Total Cost
(dollars)
Average Total Cost
(dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 11.8
117 200 1264 1464 12.5
120 200 1480
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?
Select one:
a. $956
b. $1,157
c. $10.05
d. $1,556
Table 11-7
Quantity of Lanterns Fixed Cost (dollars)
Variable Cost
(dollars)
Total Cost
(dollars)
Average Total Cost
(dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 11.8
117 200 1264 1464 12.5
120 200 1480
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns?
Select one:
a. $1,680
b. $72
c. $12.3
d. $14

Question 6
Correct
Marked out of 1.00
Question 7
Correct
Marked out of 1.00
Table 11-7
Quantity of Lanterns Fixed Cost (dollars)
Variable Cost
(dollars)
Total Cost
(dollars)
Average Total Cost
(dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 11.8
117 200 1264 1464 12.5
120 200 1480
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the average variable cost per unit of production when the firm produces 90 lanterns?
Select one:
a. $33.67
b. $490
c. $5.44
d. $7.67
Table 11-7
Quantity of Lanterns Fixed Cost (dollars)
Variable Cost
(dollars)
Total Cost
(dollars)
Average Total Cost
(dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 11.8
117 200 1264 1464 12.5
120 200 1480
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?
Select one:
a. $420
b. $32
c. $11.1
d. $8.1

Question 8
Correct
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Figure 12-1
Refer to Figure 12-1. If the firm is producing 700 units
Select one:
a. it is making a profit.
b. it is making a loss.
c. it should cut back its output to maximize profit.
d. it should increase its output to maximize profit.

Question 9
Correct
Marked out of 1.00
Refer to Figure 12-1. If the firm is producing 700 units, what is the amount of its profit or loss?
Select one:
a. profit equivalent to the area A
b. loss of $280
c. There is insufficient information to answer the question.
d. loss equivalent to the area A

Question 10
Correct
Marked out of 1.00
Refer to Figure 12-1. If the firm is producing 200 units
Select one:
a. it breaks even.
b. it should increase its output to maximize profit.
c. it is making a loss.
d. it should cut back its output to maximize profit.

Question 11
Correct
Marked out of 1.00
Refer to Figure 12-3. If the firm is producing 500 units
Select one:
a. it is making a profit.
b. it should maintain its output to maximize profit.
c. it is making a loss.
d. it should increase its output to maximize profit.

Question 12
Correct
Marked out of 1.00
Refer to Figure 12-3. If the firm is producing 500 units, what is the amount of its profit or loss?
Select one:
a. loss equivalent to the area A
b. profit of $280
c. There is insufficient information to answer the question.
d. profit equivalent to the area A

Question 13
Correct
Marked out of 1.00
Question 14
Correct
Marked out of 1.00
Refer to Figure 12-3. If the firm is charging a price of $12 per unit
Select one:
a. it is not selling any output.
b. it is making a profit.
c. it is selling 700 units.
d. it breaks even.
Which of the following is the best example of a short run adjustment?
Select one:
a. Smith University completed negotiations to acquire a large piece of land to build its new library.
b. Your local Wal-Mart hires two more associates.
c. Toyota builds a new assembly plant in Texas.
d. A local bakery purchases another commercial oven as part of its capacity expansion.

Question 15
Correct
Marked out of 1.00
Question 16
Complete
Marked out of 1.00
Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?
Select one:
a. No, it should shut down because it is making a loss.
b. No, it should shut down because it cannot cover its variable cost.
c. Yes, because it is making a profit.
d. Yes, because it is covering part of its fixed cost.
If firms do not earn economic profits in a competitive equilibrium, why would the firms choose to stay in business?
Firms may continue to operate even when they are not making an economic profit, if they are at least breaking even. By
breaking even, a firm may be content with their financial positions and decide to not look for further options, leading them to
invest more time and money.

Question 17
Complete
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Question 18
Complete
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Question 19
Complete
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Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her
business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. You are given the
following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
Calculate her economic costs.
Labor - $40,000
Materials - $15,000
Equipment - $5,000
Building Cost - $10,000
Savings - ($20,000*5%) = $1,000
Sally's Labor - $50,000
Economic Costs - $121,000
Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her
business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. You are given the
following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
Calculate her accounting costs.
Materials - $15,000
Labor - $40,000
Equipment - $5,000
Accounting Costs - $60,000
Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her
business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. You are given the
following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it
will cost me $10,000 a year to rent near town." Do you agree with her reasoning?
I do not agree with Sally, this is an opportunity cost that would factor into her economic costs. Maybe Sally could look into selling
or renting out her current location/ living space and move closer to town.

Question 20
Complete
Marked out of 1.00
Assuming a market price of $4, fill in the columns in the following table. What is the profit-maximizing level of production? What
are the two ways to determine the profit-maximizing level of production?
Quantity
Total Revenue
(TR)
Total Cost
(TC) Profit
Marginal Revenue
(MR)
Marginal Cost
(MC)
0 3
1 5
2 6
3 9
4 14
5 20
6 28
7 40
1. The greatest difference between TR (Total Revenue) and TC (Total Cost).
2. It can also be determined when Marginal Cost is equal to Marginal Revenue.
Return to: Module 2 

 

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[Solved] University of Louisiana, Lafayette - ECON 528 Homework 2.

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Question 1 Correct Marked out of 1.00 Question 2 Incorrect Marked out of 1.00 Question 3 Correct Marked out of 1.00 Started on Monday, 28 January 2019, 9:05 AM State Finished Completed on Monday, 28 January 2019, 9:21 AM Time taken 16 mins 17 secs Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs? Select one: a. $70,000 b. $42,000 c. $80,000 d. $41,500 Accounting costs exclude implicit costs. Select one: a. True b. False Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true? Select one: a. The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. c. The variable cost of running the studio is $22,000. d. The fixed cost of running the studio is $22,000. ECON528-810_ECON528-010-201940 Question 4 Correct Marked out of 1.00 Question 5 Correct Marked out of 1.00 Table 11-7 Quantity of Lanterns Fixed Cost (dollars) Variable Cost (dollars) Total Cost (dollars) Average Total Cost (dollars) 75 200 170 370 4.93 80 200 230 430 5.36 90 200 7.67 100 200 810 115 200 11.8 117 200 1264 1464 12.5 120 200 1480 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns? Select one: a. $956 b. $1,157 c. $10.05 d. $1,556 Table 11-7 Quantity of Lanterns Fixed Cost (dollars) Variable Cost (dollars) Total Cost (dollars) Average Total Cost (dollars) 75 200 170 370 4.93 80 200 230 430 5.36 90 200 7.67 100 200 810 115 200 11.8 117 200 1264 1464 12.5 120 200 1480 Table 11-7 shows co...
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