263
Chapter Questions
6.19 Economies of scope imply that cost complementarities exist, but cost complementarities do not imply the existence of economies of scope. Do you agree with this statement? If not, then why not? 6.20 Explain the difference between economies of scope and cost complementarities. 6.21 Provide examples of economies of scope and cost complementarities other than those given in the text.
CHAPTER EXERCISES 6.1 The total cost equation of a firm is given by the equation TC = 5, 000 + 2, 000Q - 10Q 2 + 0.25Q 3 where TC is total cost and Q is the level of output. a. What is the firm’s total fixed cost? b. What is the equation for the firm’s total variable cost (TVC)? c. What is the equation for the firm’s average total cost (ATC)? d. What is the equation for the firm’s marginal cost (MC)? 6.2 Suppose that a firm’s total cost equation is TC = 10, 000 + 100Q + 0.25Q 2 where TC is total cost and Q is the level of output. a. What output level will minimize the firm’s average total cost? b. Calculate the average and marginal cost at the average cost minimizing output level. 6.3 Suppose that a firm’s total cost equation is TC = 125, 000 + 100Q + 0.5Q 2 a. Determine the output level that minimizes average total cost. b. Calculate average total cost and marginal cost at the level of output that will minimize average total cost. 6.4 The long-run average total cost equation for a perfectly competitive firm is LRATC = 620 - 5Q + 0.025Q 2 a. Determine the minimum efficient scale of production. b. Calculate total cost at the minimum efficient scale of production. c. If the total level of output in the industry is 50,000 units, how many firms can profitably operate in this industry? 6.5 The total cost equation for a firm producing two products is 2
2
TC (Q1 , Q2 ) = 25 + Q1 + 4Q2 + 5Q1Q2
