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    Key - Class Activity

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    imran
    Tony is a farmer and piano teacher who must decide how to allocate his time between farming and giving piano lessons. He spent 10 hours planting seeds that cost $130 and are expected to yield $300 worth of crops, for an opportunity cost of $130 + $250 = $380. It would not be profitable for him to farm, but would be if the crops yielded $500. Susan runs a factory making widgets. She pays $500 daily rent regardless of production. Her costs are this rent and workers' $120 daily wages. She sees increasing outputs but decreasing average costs as she hires more workers. Variable costs for a car manufacturer include unemployment insurance based on worker-hours, steel for cars, and

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    Key - Class Activity

    Uploaded by

    imran
    29 views2 pages
    Tony is a farmer and piano teacher who must decide how to allocate his time between farming and giving piano lessons. He spent 10 hours planting seeds that cost $130 and are expected to yield $300 worth of crops, for an opportunity cost of $130 + $250 = $380. It would not be profitable for him to farm, but would be if the crops yielded $500. Susan runs a factory making widgets. She pays $500 daily rent regardless of production. Her costs are this rent and workers' $120 daily wages. She sees increasing outputs but decreasing average costs as she hires more workers. Variable costs for a car manufacturer include unemployment insurance based on worker-hours, steel for cars, and

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    1. Key_Class activity

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    Tony is a farmer and piano teacher who must decide how to allocate his time between farming and giving piano lessons. He spent 10 hours planting seeds that cost $130 and are expected to yield $300 worth of crops, for an opportunity cost of $130 + $250 = $380. It would not be profitable for him to farm, but would be if the crops yielded $500. Susan runs a factory making widgets. She pays $500 daily rent regardless of production. Her costs are this rent and workers' $120 daily wages. She sees increasing outputs but decreasing average costs as she hires more workers. Variable costs for a car manufacturer include unemployment insurance based on worker-hours, steel for cars, and

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    29 views2 pages

    Key - Class Activity

    Uploaded by

    imran
    Tony is a farmer and piano teacher who must decide how to allocate his time between farming and giving piano lessons. He spent 10 hours planting seeds that cost $130 and are expected to yield $300 worth of crops, for an opportunity cost of $130 + $250 = $380. It would not be profitable for him to farm, but would be if the crops yielded $500. Susan runs a factory making widgets. She pays $500 daily rent regardless of production. Her costs are this rent and workers' $120 daily wages. She sees increasing outputs but decreasing average costs as she hires more workers. Variable costs for a car manufacturer include unemployment insurance based on worker-hours, steel for cars, and

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Key_Class activity 1

    1. Tony is a farmer as well as piano teacher. He charges $ 25 an hour for piano lessons, and
    has more students requesting lessons than he has time for if he is to also maintain his
    farming business. One spring day he spent 10 hours to plant $130 worth of seeds. He
    expects that the seeds will yield $300 worth of crop.

    Question Answer
    a. What is the total opportunity cost of the planting? 130+250=380
    b. Is it profitable for Tony to do this? No
    c. What if the crop was worth $500? Yes

    2. Susan runs a factory to make widgets. She pays $500 per day rent for the factory regardless
    of whether she produces anything. Her production quantity depends on the number of
    workers she hires (please see Table below). The wage rate of the workers is fixed at $120
    per day. These are her only costs. Please complete the table below.

    # of Output per Fixed Costs Variable Costs Total Average Marginal


    workers day (Rental) (Wages) Costs Costs Costs

    1 5 500 120 620 124 24


    2 10 500 240 740 74 24
    3 20 500 360 860 43 12
    4 35 500 480 980 28 8
    5 55 500 600 1100 20 6
    6 70 500 720 1220 17.4 8
    7 80 500 840 1340 16.75 12

    3. A large firm produces and sells automobiles. Its Variable Costs are:

    Question Enter YES or NO


    a. Unemployment insurance premium paid by the firm based on Y
    the worker-hours it uses
    b. Cost of the steel used in producing automobiles Y
    c. Cost of the electricity of running the machines on the factory Y/N
    floor

    4. Which of the following expressions is correct?

    Question Enter YES or NO


    a. marginal cost = (change in quantity of output)/(change in N
    total cost)
    b. average total cost = (total cost)/(quantity of output) Y
    c. total cost = variable cost + marginal cost N
    d. average variable cost = (quantity of output)/(total variable N
    cost)

    5. Amanda is a watermelon farmer. If she plants no seeds, she gets no harvest. If she plants 1 bag
    of seeds, she gets 30 watermelons; with 2 bags of seeds, 50 watermelons; and with 3 bags of
    seeds, 60 watermelons. A bag of seeds costs $100, and the costs of seeds are her only costs.

    Question Enter YES or NO


    a. The marginal cost curve is U-shaped N
    b. The marginal cost decreases when output increases N
    c. The marginal cost reflects diminishing marginal product Y
    d. Her marginal costs are always less than the average costs N

    6. The minimum points of the average variable cost (AVC) and average total cost (ATC) curves
    occur where:

    Question Enter YES or NO


    a. The MC curve lies below the AVC and ATC curves. N
    b. The MC curve intersects those curves. Y
    c. The AVC and ATC curves intersect N
    d. The slope of total cost (TC) is the smallest N
    7. Which of the figures below represents the total cost curve for a firm?

    Question Enter YES or NO


    a. Figure 1 N
    b. Figure 2 Y
    c. Figure 3 N
    d. Figure 4 N

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