Answer To: homework assignments on Cengage
Komalavalli answered on Dec 19 2021
HW Chapter 8:
1. Problems with team production : Ans: The principal agent problem
2. Firm structure :
a)Which type of business accounts for the majority of sales revenue in the United States? Ans: Corporation
b)Business structures in which ownership and management are separate, as with corporations, are subject to principal–agent problems. Which of the following may help reduce such problems and promote cost efficiency? Check all that apply.: Ans: Profit-sharing agreements with managers and Loyal customers who will buy the firm’s products unconditionally
3. Gilberto lives in Philadelphia and runs a business that sells boats. In an average year, he receives $726,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $426,000; he also pays wages and utility bills totaling $264,000. He owns his showroom; if he chooses to rent it out, he will receive $13,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Gilberto does not operate this boat business, he can work as a paralegal, receive an annual salary of $22,000 with no additional monetary costs, and rent out his showroom at the $13,000 per year rate. No other costs are incurred in running this boat business.
Explicit cost are those cost that firms pay outsiders for their services and goods.It is a actual amount that spent by a firm on buying or hiring of factor inputs and non factor inputs
a) The wages and utility bills that Gilberto pays = Explicit cost
b) The wholesale cost for the boats that Gilberto pays the manufacturer = Explicit cost
Implicit costs are the cost of self employed or self owned resources
c) The salary Gilberto could earn if he worked as a paralegal = Implicit cost
d) The rental income Gilberto could receive if he chose to rent out his showroom =Implicit cost
e ) Accounting profit = 726000-690,000 =$36,000
Accounting profit = Total Revenue –Explicit cost
Total Revenue = $726000
Explicit cost = $426,000 + $264,000 = $690,000
f) Economic profit = 726000-725,000=$1,000
Economic profit = Total Revenue –Total cost
Total Revenue = $726000
Total cost= Explicit cost +Implicit cost
= $690,000+($22,000+$13,000)
= $690,000+$35,000 = 725,000
4)
Game
Game result
Total
Game free throw percentage
Average free throw percentage
1
4/5
4/5
80%
80%
2
2/5
3/5
40%
60%
3
1/4
1/2
25%
50%
4
1/2
1/2
50%
50%
5
1
3/5
100%
60%
You can think of the result in any one game as being Susan’s marginal free-throw percentage. Based on your previous answer, you can deduce that when Susan’s marginal free-throw percentage is below the average, the average must be falling
For a U-shaped average total cost (ATC) curve, when the marginal cost curve is below the average total cost curve, the average total cost must be falling . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be rising . Therefore, the marginal cost curve intersects the average total cost curveat its minimum .
5)
Quantity
TC
MC
FC
VC
AVC
ATC
0
120
---
120
---
---
---
1
200
80
120
80
80
200
2
240
40
120
120
60
120
3
285
56
120
165
55
95
4
340
66
120
220
55
85
5
425
85
120
305
61
85
6
540
115
120
420
70
90
6)
Workers
Total
Average
Marginal
0
0
1
12
12
12
2
28
14
16
3
42
14
14
4
52
13
10
5
55
11
3
Marginal product (MP) and average product (AP) curves always intersect at the Maximum of the AP curve.
7.) Suppose Ike’s Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $ 440 per bike.
Suppose Ike’s Bikes is expecting to produce 100 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using One Factories .
SATC
Q = 100
Q = 200
Q = 300
Q = 400
Q = 500
Q = 600
1
440
280
240
320
480
800
2
620
380
240
240
380
620
3
800
480
320
240
280
440
LATC
Q=100
Q = 200
Q = 300
Q = 400
Q = 500
Q = 600
440
280
240
240
280
440
Range
Economies of Scale
Constant Returns to Scale
Diseconomies of...