Unit 3 Problem Set Rubric

Instructions Put away you pen and pencils Put your name where it says “Graded by:” We will grade questions 1 and 4 After grading each question, write in their score in the blank. ex: ( ____/5) Follow the directions explicitly!

Questions #1: Real World Examples 20 Points Total

5 Point Total A. Law of Diminishing Marginal Returns 2 Points- Definition (As additional inputs (workers) are added to fixed resources, the additional output generated by each new input will eventually fall. 2 Points- Example showing that MARGINAL PRODUCT (additional output from each new worker) will eventually fall 1 Point (Clarity)- Numbers in example (numbers show how marginal product eventually falls)

5 Point Total B. Fixed, Variable, and Total Costs 1 Point- definition of fixed costs (costs that DO NOT change with the amount produced) 1 Point- Example of a fixed costs/resource 1 Point- definition of variable costs (costs that change with the amount produced) 1 Point- Example of a variable cost/resource 1 Point- definition of total cost (fixed plus variable cost)

C. Accounting vs. Economic Profit 5 Point Total 1 Point- definition of accounting profit (revenue minus accounting cost or traditional out of pocket costs) 1 Point- Example excluding opportunity cost 1 Point- definition of economic profit (revenue minus accounting and opportunity cost) 1 Point- Example including opportunity cost 1 Point- Clarity of examples

D. Economies and diseconomies 5 Point Total 1 Point- definition of economies of scale (Long run costs fall as mass production techniques are used) 1 Point- Example 1 Point- definition diseconomies of scale (Long run costs increase as the business becomes difficult to manage) 1 Point- Clarity of examples

3. Cory’s Surfboard Inc. 20 Points Total

3.The Chart 5 Point Total 1 Point 1 Point 1 Point 1 Point 1 Point

3. A: Plotted Graph MC ATC AVC AFC 5 Point Total Cost/Price Quantity 1 point- Correctly labeled axis with numbers 1 point- Correctly plotted MC 1 point- Correctly plotted ATC 1 point- Correctly plotted AVC 1 point- Correctly plotted AFV MC ATC AVC Cost/Price AFC Quantity

Question #3B 5 Point Total MC1 MC ATC1 AVC1 ATC AVC AFC 1 Point- Cory’s MC, ATC, and AVC curves would increase. 1 Point- Fixed costs will not change 1 Point- Each correct shift Question #3B MC1 MC ATC1 AVC1 ATC AVC Costs (dollars) AFC Quantity

Question 3.C. OR 5 Point Total 1 point- Output = 7 surfboards 1 point- Explanation- Cory should produce where MR=MC to maximize profits 2 point- $65.71 Profit per Unit 1 point- Explanation- Cory is selling each unit for $150 and his cost for each surfboard is $84.29. OR Total Profit equals TR ($1050)- TC ($590)= $460 $460 divided by 7 equals $65.71

4. Practice FRQs

5. Perfect Competition 10 Points Total

5 Points- Long Run to Short-Run 5 Points- Short-run back to Long-run MC ATC $10 $10 MR=D D Q 5000 8 Q Industry Firm 15 Copyright ACDC Leadership 2015

Demand Increases The price increases and quantity increases Profit is made in the short-run P S P MC ATC $10 $10 MR=D $5 $5 MR1=D1 D D1 Q 5000 7 8 Q Industry Firm 16 Copyright ACDC Leadership 2015

Demand Increases The price increases and quantity increases Profit is made in the short-run S1 P S P MC ATC $10 $10 MR=D $5 $15 MR1=D1 D D1 Q 3000 5000 7 8 Q Industry Firm 17 Copyright ACDC Leadership 2015

Demand Increases The price increases and quantity increases Profit is made in the short-run S1 P P MC ATC $10 $10 MR=D D1 Q 3000 8 Q Industry Firm 18 Copyright ACDC Leadership 2015