Final Micro Mankiw_13thrul7_Spring 2017 and Later Vcrsion A Yonr test will consi

Question

Final Micro Mankiw_13thrul7_Spring 2017 and Later Vcrsion A Yonr test will consist of 43 True False and Mnltiple choice questions and one problem solving question. Topics (more than the number of question) follow the problem solving question Formula section Total profit(T) of questions Chapter 13 14 15 16 17 Total A Q settingene left term equal to zero sincethe slope must equal zero at a maximum, we get: and addirg MC to both sides yields: A Q 45 0 =MR-MC Th e problem solving question is below: NIC-MR 1 Provo tha profit maximizinglolof output using formulas and graphs. Do this exactly as shouwn in class. Make sure to indicate the relationship betweenmarginal cost and marginal ravenua inthe formula portion AND In the graph portion. Draw the graph carefully and make sure to label the profit maximizing quantity with a Distinguish between ac 2. Knowhow to caleulare any average (cost or anything clse -1. counting costs and d ecanomie costs,whihis a subset ofthe other? Slope of Tangeet Line 0 3. Is it true that since total fixedcost does not change with output (quantity), then average fixod cost doesnot 4. Whatbappesto vege total cost under econoies ofscale, contant returs to scale and decreasing retums ta 5. Distinguish between the law ofdiminsingretums (also called the law ofdiminisling marginal product) and change with output Protir scale any retums to scale. 6. Be able to calculate and definec any marginal. 7. Know the relationship of MC to AVC andATC. I MC> MR -8. ATC =AFC + AVC MRMC 9. Is it true that profitmaximizationrequires cast minimization? Quastty

Explanation / Answer

1. Accounting costs account only for the explicit costs incurred in conducting a business and not the implicit costs. The explicit costs include the direct costs to the company, such as employee wages, utility bills, raw material cost etc. Economic costs, on the other hand, account for both explicit and implicit costs. Implicit costs is the opportunity cost in terms of revenue lost by forgoing the next best alternative, say renting out premises instead of conducting the business there. Accounting costs are subset of Economic costs.

2. Average = Total / no.

Average cost = Total cost / Quantity

3. Since TFC = Fixed,

Hence, AFC = Fixed no. / Quantity

As Q rises, AFC falls, hence, it is not constant.

4. Under economies of scale, AC declines.

Under constant rerurns to scale, AC is constant.

Under decreasing rerurns to scale, AC increases.

Note: max. 4 questions

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