. Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earn $200 per acre. Is he currently earning an economic profit? Why or why not?
2. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for labor purchased in the labor market
b) A firm’suse of a warehouse that it owns and could rent to another firm
c) The wages that owners could earn if they did not work for themselves
3. What are economies of scale? Please give an example. What are diseconomies of scale? Please give an example.
4. Your rich relative died and left you $100,000, which ...view middle of the document...
In each case, indicate whether the firm should produce in the short run or shut down in the short run, or whether additional information is needed to determine what it should do in the short run
a. Total cost exceeds total revenue at all output levels.
b. Total variable cost exceeds total revenue at all output levels.
14. (The Long-Run Industry Supply Curve) A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium. Briefly explain the short-run adjustments for the market and the firm to a decrease in consumer incomes. What happens to output levels, prices, profits, and the number of firms?
15. (Long-Run Industry Supply) Why does the long-run industry supply curve for an increasing-cost industry slope upward? What causes the increasing costs in an increasing-cost industry?
16. The National Council of Economic Education’s EconEdLink has an interesting module on the economics of Internet access at http://www.econedlink.org/lessons/index.cfm?lesson=NN10 Please review the materials provided. Is provision of Internet access a competitive industry? Briefly discuss.
17. Commodities like gold often trade in markets that are examples of perfect competition. Think a commodity that you believe trades in a perfectly competitive market, and describe why you believe this is so.
18. (The Short-Run Firm Supply Curve) An individual competitive firm’s short-run supply curve is the portion of its marginal cost curve that equals or rises above the average variable cost. Explain why.
19. What are the major characteristics of perfectly competitive market?
20. (Perfect Competition and Efficiency) Define...