Q. No. 4. Suppose Honda’s total cost of producing 4 cars is $225,000 and its total cost of…

Q. No. 4.

Suppose Honda’s total cost of producing 4 cars is $225,000 and its total cost of producing 5 cars is $250,000. What is the average total cost of producing 5 cars? What is the marginal cost of the fifth car? Draw the marginal-cost curve and the average-total-cost curve for a typical firm, and explain why these curves cross where they do.

Q. No. 5.

If Boeing produces 9 jets per month, its long-run total cost is $9.0 million per month. If it produces 10 jets per month, its long-run total cost is $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale?

Q. No. 6.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant.

a. Define opportunity cost.

b. What is your aunt’s opportunity cost of running a hardware store for a year? If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store? Explain.





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