Unit+2+-+Demand,+Supply,+and+Prices

**Ch. 5-2 Questions**
1. Draw a flow chart that shows what happens in the 3 stages of production. For an example of a flow chart, click here: [|Flow Chart Sample] 2. Why would changing capital goods be difficult in the SHORT run? 3. Suggest how a factory manager might use the Law of Variable Proportions. 4. (Topic: Production Function). Example: 1 worker produces 7 units of output, 2 workers produce 20 units, etc. The only thing that changes in this example is the # of workers. Other INPUTS remain the same. Question: Based on the production function above, what was the marginal and total outputs when the 2nd worker was added. How did you get these numbers? 5. Suppose the last worker hired increases a factory's production from 28 units to 30 units. The next-to-last worker hired increased production from 20 units to 28. In what stage of production is the factory? Explain your answer.

**Ch. 5-3 Questions**
1. A farmer has to pay rent for a warehouse in which to store peaches that have just been picked. The farmer has to pay this rent even during the winter, when there are no peaches in the warehouse. Is the rent a fixed cost or a variable cost? Explain. 2. Explain why it is worthwhile to keep a movie theater open during the afternoon even though there are far fewer customers than during the evening. Include at least two terms from this section. 3. What is the difference between total revenue and marginal revenue? 4. What happens when marginal cost is equal to marginal revenue?

5. Based on the chart above, answer the following questions: (The answers for this question do not have to be in complete sentences) 5a. What is significant about an output of 600? 5b. Is it better for the company in this example to have an output of 800 or 400? Why? 5c. An output of 1000 leads to a cost of approximately $1200. What costs factor into the $1200 figure?