BA 206: Microeconomics

Assignment#3

Instruction: Please answer each questions with sufficient
detail. Relevant detailed responses are highly rewarded. If you consult any
sources, then you should provide both in-text citations and reference at the
end for each responses. You need to make sure at least consult your textbook
for your responses.

1. Distinguish
between explicit and implicit costs, giving examples of each. What are some
explicit and implicit costs of attending college? (20%)

2. Complete
the table directly below by calculating marginal product and average product.
(20%)

Inputs of labor Total
Product Marginal Product Average Product

0 0 NA NA

1 15

2 34

3 51

4 65

5 74

6 80

7 83

8 82

3. A firm
has fixed costs of $60 and variable costs as indicated in the table at the
bottom of this page. Complete the table and check your calculations by
referring to problem 4 at the end of Chapter 10. (20%)

Total Product Total
Fixed Cost Total Variable
Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost

0 $0

1 45

2 85

3 120

4 150

5 185

6 225

7 270

8 325

9 390

10 465

4. “Even if
a firm is losing money, it may be better to stay in business in the short run.”
Is this statement ever true? Under what
condition(s)? Discuss with sufficient detail. Provide an example if necessary.
(20%)

5. Consider
a profit-maximizing firm in a competitive industry. For each of the following
situations, indicate whether the firm should shut down production or produce
where MR = MC. (20%)

a. P < minimum AVC.

b. P > minimum ATC.

c. Minimum AVC < P < minimum ATC

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