Question

1. The incomplete table below shows key cost information for a firm on a competitive market that sells its product at $75 per unit, with $6,000 in fixed costs.

(a) Fill in the missing values. For each column, indicate the formula you’re using to calculate the values.

Q	VC	FC	TC	AFC	AVC	ATC	TR	Profit
0	0			-	-	-
100	2500
150	4000
200	6000
250	8500
300	11500
350	15000
400	19000
450	23500
500	28500

Please note: you may find it easiest to do these calculations in Excel. The table above can be pasted into Excel with a single copy-and-paste sequence—just move your cursor over the table till the cross-shaped icon shows up off the upper left corner of the table. Click on that, which selects the whole table, copy, paste into Excel, and you’re on your way. Indicate the formula you use for each column. Then copy and paste your Excel table into your Word document as one of the sheets you upload as part of your answers.

(b) Do AFC and ATC behave the way we’d expect? You can graph this if it helps you answer the question, but a good examination of the table and an explanation should suffice.

(c) What’s this firm’s profit-maximizing output, and what is profit at that point?

Answer 1

(b)

Yes the ATC graph and AFC graph are showing the usual trend in them. ATC curve tends to be U shape as usual while AFC curve falling continually and tends to approach 0.

(c) as we can see from the table the maximum profit is 5250 and at 350 units produced.