FIU Principles of Microeconomics Worksheet

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Economics

Florida International University

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ECO 2023 Principles of Microeconomics Homework Assignment #4 (Chapter 7) Instructions: Provide your name, Panther ID, and the date on a sheet of paper. Answer all of the questions below. Show all your reasoning, work, steps, methodologies, tables, and graphs used to get your answers in order to get full credit. Failure to follow the directions may result in deductions to your grade. Assignments will be graded based on the rubric found in the syllabus. Upload your finished document and file into the Assignment Dropbox for the appropriate assignment in Canvas (a .pdf file is strongly preferred). Please ensure that your file has uploaded correctly otherwise your assignment will be considered missing, and a grade of “0” will be applied. Question 1 After being the President of the United States, Kanye West has decided to start selling his music on the streets of New York City. After one year in business, he was able to sell 70,000 CDs for $25 each. He paid $255,000 in wages, $181,000 in lease payments, $145,000 on drugs and alcohol, $75,000 in paparazzi insurance, $22,000 in utilities, and $43,000 for office supplies. He could have earned $288,000 working for a record label and an additional $75,000 by investing in the stock market rather than in his business. a) What are Kanye’s total revenues? b) List both Kanye’s explicit and implicit costs. c) Calculate Kayne’s accounting and economic profit. d) What should Kanye do based on the answer you solved for in (c)? Question 2 Suppose you are the manager for the pharmaceutical company, The Umbrella Corporation and want to find out how productive your workers are. The table below shows the number of workers, total output and marginal output for the company. Number of Workers Total Output Marginal Product Average Product 0 0 0 0 1 80 2 120 3 300 4 60 5 400 a) Fill out the table with the correct numbers and calculations. b) For how many workers does the company have increasing marginal returns? c) When do diminishing returns set in for the company? Question 3 Suppose now you want to look at the costs for the company. The table below shows that various cost aspects. Q FC VC TC MC AFC AVC ATC 0 400 N/A N/A N/A N/A 10 120 12.00 20 400 600 30.00 30 8.68 40 708 50 348 4.00 14.96 a) Fill in the blanks in the table with their respective values. Round all calculations to two (2) decimal points. Remember to show all of your work. b) What do you notice about the AFC as output increases? What is this effect called? Question 4 The Umbrella Corporation now wants to expand its business operations based on the data you have provided to them. As the firm’s output expands there are a few things that can happen to its long-run average total costs. a) What are the different types of scales, and what happens under each one? b) What type of scales would the company like to be operating at? Explain your reasoning. Suppose the company wants to lower its costs by producing products that use similar and interdependent processes and materials as its main line of goods. c) What phenomenon is the company trying to achieve? d) Provide two examples (real or fictional) of this phenomenon, and be as specific as you can regarding the company’s products. ECO 2023 Principles of Microeconomics Homework Assignment #5 (Chapter 8) Instructions: Provide your name, Panther ID, and the date on a sheet of paper. Answer all of the questions below. Show all your reasoning, work, steps, methodologies, tables, and graphs used to get your answers in order to get full credit. Failure to follow the directions may result in deductions to your grade. Assignments will be graded based on the rubric found in the syllabus. Upload your finished document and file into the Assignment Dropbox for the appropriate assignment in Canvas (a .pdf file is strongly preferred). Please ensure that your file has uploaded correctly otherwise your assignment will be considered missing, and a grade of “0” will be applied. Question 1 Daryl Dixon wants to start his own hunting business, where he sells crossbows and provides other outdoor services. However, he isn’t sure under what type of market structure his business operates under. a) List the different types of market structures and list at least four characteristics/features for each of them. b) Provide two examples (real or fictional) of firms or companies that you believe operate under each market structure. Please try to provide examples that are not given in the lecture slides or in the lectures. Daryl notices that the demand curve for perfectly competitive firms are different from other market structures. c) According to the lectures, what are the three properties of perfectly competitive demand curves that differentiate it from other market structures? Suppose Daryl wants to maximize profits under the perfectly competitive market structure. d) What is the five-step process he will need to take to determine the maximum profit for his firm? e) What are the three economic situations his firm might find itself in the short run? How can he tell the differences between each situation? Question 2 Negan is the owner of a store that sells baseball bats, and it operates under a perfectly competitive market structure. The graph below details some of the various aspects of Negan’s firm. a) b) c) d) e) f) What is the price and output that maximizes the firm’s profit? At the profit-maximizing output, calculate total revenue and total cost. If the firm maximizes profit, how much profit does it earn? What will happen to market demand and market supply in the long run? What will happen to the market price in the long run? What is the firm’s transition from the short run to the long run known as? Question 3 Rick Grimes owns a fish store called Coral! that sells exotic fish, supplies, equipment, and services. A few of his cost curves are illustrated in the graph below. Suppose the market price is $20. a) What economic situation does the firm find itself in? Explain your reasoning. b) Should the firm continue operations or shut down? Explain your reasoning. Suppose the market price is $15. c) What economic situation does the firm find itself in? Explain your reasoning. d) Should the firm continue operations or shut down? Explain your reasoning. Suppose the market price is $12.50. e) What economic situation does the firm find itself in? Explain your reasoning. f) Should the firm continue operations or shut down? Explain your reasoning. Suppose the market price is $5. g) What economic situation does the firm find itself in? Explain your reasoning. h) Should the firm continue operations or shut down? Explain your reasoning. Question 4 Michonne works as the head chef in the restaurant, Slice ‘n Dice, and her restaurant is mapping out its business plan as it transitions from the short run to the long run. a) b) c) d) How does the perfectly competitive firm’s supply curve differ from the short run to the long run? What different slopes can the long-run supply curve take? Connect each of the slopes with a specific cost industry and briefly detail why they are connected. What types of scales are each of these industries associated with?
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1

ECO 2023 Principles of Microeconomics:
Homework Assignment #4 (Chapter 7)

Student Name
Panther ID
Institution
Course
Date

2

Answer All of The Questions Below:
Question 1:
a) Kanye's total revenues are $25 x 70,000 = $1,750,000.
b) Kanye's explicit costs are $255,000 in wages, $181,000 in lease payments, $145,000
on drugs and alcohol, $75,000 in paparazzi insurance, $22,000 in utilities, and $43,000 for office
supplies. His implicit costs are $288,000 in opportunity cost of working for a record label and
$75,000 in opportunity cost of investing in the stock market.
c) Kanye's accounting profit is $1,750,000 - $698,000 = $1,052,000. His economic profit
is $1,052,000 - $363,000 = $689,000.
d) Based on the answer in (c), it would be better for Kanye to work for a record label and
invest in the stock market.
Question 2
Suppose you are the manager for the pharmaceutical company, The Umbrella
Corporation and want to find out how productive your workers are. The table below shows the
number of workers, total output and marginal output for the company.
Number of Workers
0
1
2
3
4
5

Total Output
0
80
160
300
360
400

Marginal Product
0
80
120
140
60
40

Average Product
0
80
80
100
90
80

a)

See the table

b)

The company has increasing marginal returns for 1-3 workers.

c)

The company has diminishing returns for 4 workers and beyond.

3

Question 3
Suppose now you want to look at the costs for the company. The table below shows
various cost aspects.
Q
0
10
20
30
40
50
...


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