1 What is the relationship between a firm’s total revenue, profit, and total cost?
2 Give an example of an opportunity cost that an accountant might not count as a cost. Why would the accountant ignore this cost?
3 What is marginal product, and what does it mean if it is diminishing?

4 Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn. Define total cost, average total cost, and marginal cost. How are they related?

5 Draw the marginal-cost and average-total-cost curves for a typical firm.

6  Explain why the curves have the shapes that they do and why they cross where they do.

7  How and why does a firm’s average-total-cost curve differ in the short run and in the long run?

8 Define economies of scale and explicit why they might arise. Define diseconomies of scale and explain why they’ might arise.

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