Question

Consider the following total cost function for Firm A: TC(Q)=4Q3-12Q2+2Q+1,000,000. Calculate TVC, AVC, TFC, AFC, AC. Does this cost function satisfy the law of diminishing returns? Hint: MC(Q)= 12Q2-24Q+2 Consider the following Long-run average cost function for Firm A: TC(Q)= 12Q+4 (Q represents the scale of operation). Does this firm benefit from scaling down? Explain your answer.

Answer #1

We are given that TC = 4Q^3 - 12Q^2 + 2Q + 1,000,000. We find that

TVC = Variable part of TC = 4Q^3 - 12Q^2 + 2Q

, AVC = TVC/Q = (4Q^3 - 12Q^2 + 2Q)/Q = 4Q^2 - 12Q + 2

TFC = fixed part of TC = 1,000,000

AFC = TFC/Q = 1,000,000/Q

AC = TC/Q = 4Q^2 - 12Q + 2 + 1,000,000/Q

Now we have MC = 12Q^2 - 24Q + 2. Find the derivative of MC and see that dMC/dQ = 24Q - 24. Since Q > or

= 0, dMC/dQ > 0 and this suggests that MC is an increasing function of Q which implies MP or marginal product

is a decreasing function. Hence there are diminishing returns.

Long run average cost function is LAC = 12Q + 4. As output rises, LAC rises as well. Hence there are

diseconomies of scale if the firm raises output. This firm, therefore, does not benefit from scaling down

3. Cost Tables
(a) Fill in the following table, where TFC = Total Fixed Cost,
TVC = Total Variable Cost, TC = Total Cost, AFC = Average Fixed
Cost, AVC = Average Variable Cost, ATC = Average Total Cost, and MC
= Marginal Cost. Remember the following relationships:
TFC + TV C = TC
AF C = T F C/Q, AV C = T V C/Q, AT C = T C/Q
MC = ∆TC ∆Q
Output (Q)
TFC
TVC
TC...

Give the formulas for and plot AFC, MC, AVC and AC if the cost
function is
it is the thing that I got the result from Chegg, Can u explain
me why C = 10+10q-4q^2+2^3 became C = 10 + 10Q - 2Q^2 + Q^3 ?
and if not can u give me the right formulas for plot AFC,MC, AVC
and AC
c. C = 10 + 10q-4q^2+q^3
c.
C = 10 + 10Q - 2Q^2 + Q^3
FC =...

Q
TC
TVC
TFC
AC
MC
AVC
1
100
2
160
3
20
4
95
5
170
6
120
the following incomplete table shows a firms various costs of
producing up to 6 units of output. fill in as much as possible. If
you cannot determine the number in a box, explain why it is not
possible to do so

Labour (hrs)
(Input)
TP
(Output)
AP
(Avg. Product)
MP
TVC
TFC
TC
(Total Cost)
AVC
ATC
MC
0
0
9
35
222
15
50
22
70
30
85
39
100
48
110
Complete the table above, assuming that the labour costs
are $8 / hr
What is the point of maximum productivity :
____ units of labour (input)
What is the AVC _____ and ATC
_____ at this quantity?
What is the quantity of diminishing returns?
____
What is the...

A perfectly competitive firm has the following total cost and
marginal cost functions:
TC = 100 +
10q – q2 + (1/3)q3
MC =
q2 – 2q +10
a) For quantities
from 0 to 10 determine: TC, TFC, TVC, and MC.
b) For quantities
from 0 to 10 determine: ATC, AFC, and AVC.
c) Assume P (MR)
equals 45. For quantities from 0 to 10 determine: TR and
profit.
d) At what quantity is
profit maximized?...

9. Average cost in the long-run is defined as _____.
TVC/Q
TC/Q
TVC + TFC/Q
none of the above
10. Economies of scale is a characteristic of production where
______.
average costs increase as output increases
total cost decreases as output increases
average cost decreases as output increases
average cost decreases as output decreases
11. Which of the following factors of production is more likely
to be fixed in the short run?
The number of workers.
Changes in electricity consumed....

Consider a firm with the demand function P(Q)=(50-2Q), and the
total cost function TC(Q)=10,000+10Q. Find the profit maximizing
quantity. Calculate the profit maximizing price (or the market
price). Hint: MR(Q)=(50-4Q),

4. Answer the following questions:
a). If Total Variable Cost (TVC) = $80 and Average Variable Cost
(AVC) = 4, then what does Quantity (Q) equal to?
b). If Total Cost (TC) is $40 when Q = 2 and TC is $45 when Q =
3, then what does Marginal Cost (MC) equal to?
c). What does Average Fixed Cost (AFC) equal at Q = 2 if TVC is
$15 at Q = 2?
d). Why does the AFC curve...

Consider a firm with the production function
f(L,K)=L1/2K2 Suppose the firm is in the
short run and has a level of capital K = 1. If the cost of labor is
w=2 and the cost of capital is r=2, derive the a) TVC, b) TFC, c)
TC, d) MC, e) ATC, f) AVC, ) AFC. Draw these curves in a relevant
set of well-labelled diagrams. Repeat the exercise if the firm was
in the short run with a capital level...

Complete the table below, which represents the production costs
for a typical firm. TP is total product (which is also Q). Please
note that for the first row (where TP = 0), you cannot calculate
the AFC, the AVC, the ATC and the MC, since there are 0 units being
produced. However, you are expected to calculate the TC for the
first row (where TP =0) and you are also expected to fill in all
the other missing numbers in...

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