For the average consumer, the cost of purchasing insurance is greater than expected payoff from the insurance.

True

False

Average total cost is important to a business because

Multiple Choice

a) It tells the firm what the profit per unit produced is.

b) It always declines as more output is produced.

c) It tells the firm what its fixed costs are.

d) It is an indicator of the production function.

Create a cost-benefit analysis for regulating the sharing economy in Canada. Identify the stakeholders.

Suppose that a firm in a monopolistically competitive market has a cost function of TC= 100,000 + 20Q.

1. What is the marginal cost function?
2. If the price elasticity of demand is currently -1.5, what price should the firm charge?
3. What is the marginal revenue at the price computed in part b)?
4. If a competitor develops a substitute product and the price elasticity of demand increases to -3.0, what price should the firm now charge?

Suppose that a competitive firm faces a market price of $8, an average variable cost of (AVC) or 7, fixed costs of ($400) and is maximizing their profits by producing 200 units.  Will the firm produce in the short run?  Will the firm produce in the long run?

True/False. Explain.  If a PPF is concave, then this reflects the principle of decreasing opportunity cost and can be explained by perfect transferences of resources.

What is the opportunity cost for a company paying a worker $15? Can the company continue to pay $15/hr if the market wages are $20? Explain why and how.

In the market in which you just participated, a seller only incurred a cost if she actually sold an orange. Assume instead:

• Each seller brings oranges to market

• Each has already paid for the oranges she brings

• She can always bring unsold oranges to tomorrow’s market, where demand is expected to be stronger.

1. If you are a seller, how does this change affect your behaviour?

2. In a market described by these new assumptions, what do you predict will happen to the price?