7. Suppose the cost of machines increases to $55, while the cost of labor stays at $40. How would that affect

the total cost of the three methods? Which method should the firm choose now?

8. Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four

domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity

produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic

auto industry in the long run?

Review Questions

9. What are explicit and implicit costs?

10. Would you consider an interest payment on a loan to a firm an explicit or implicit cost?

11. What is the difference between accounting and economic profit?

12. What is a production function?

13. What is the difference between a fixed input and a variable input?

14. How do we calculate marginal product?
{"creationdate": "2022-12-07T14:15:44-06:00", "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:37:44.339247", "total_pages": 597, "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner"}