Question

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 |
AFC |
AVC |
ATC |
MC |

0 |
500 |
0 |
500 |
- |
- |
- |
- |

1 |
500 |
200 |
|||||

2 |
800 |
||||||

3 |
850 |
||||||

4 |
950 |
||||||

5 |
120 |
||||||

6 |
800 |

(b) Graph AFC, AVC, ATC and MC on the same axis. Be accurate.

Answer #1

A.

Quantity | TFC | TVC | TC | AFC | AVC | ATC | MC |

0 | 500 | 0 | 500 | ||||

1 | 500 | 200 | 700 | 500 | 200 | 700 | 200 |

2 | 500 | 300 | 800 | 250 | 150 | 400 | 100 |

3 | 500 | 350 | 850 | 166.6666667 | 116.6666667 | 283.3333333 | 50 |

4 | 500 | 450 | 950 | 125 | 112.5 | 237.5 | 100 |

5 | 500 | 600 | 1100 | 100 | 120 | 220 | 150 |

6 | 500 | 800 | 1300 | 83.33333333 | 133.3333333 | 216.6666667 | 200 |

FORMULAS:

TFC + TV C = TC

AF C = T F C/Q

AV C = T V C/Q

AT C = T C/Q

MC = ∆TC ∆Q

B.

Q3: Complete the following table. Hint: Start with the first
row.
Q (units)
TFC ($)
TVC ($)
TC ($)
AFC ($/unit)
AVC ($/unit)
ATC ($/unit)
MC ($/unit)
0
$1,800
–
–
–
–
1
$600
2
$400
3
$1,200
4
$2,800

Complete the following table accurately.
[5 Marks] Draw the TFC,
AFC and AVC in one graph
Q
TVC
TFC
TC
MC
ATC
AFC
AVC
0
0
100
1
20
2
38
3
51
4
62
5
75
6
90

Given the following information about a firm’s costs,
complete the following chart. Graph the TC, TFC and TVC on one
graph and directly below it (stack) a graph with the ATC, AFC, AVC
& MC.
Q
TC
TFC
TVC
ATC
AFC
AVC
MC
0
$2,500
--
25
20.00
50
$900
75
$49.33
100
15.00
125
$2,000
150
$5,050
175
$32.29
200
19.00

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...

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 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.

Q2: Complete the following table. Show costs to 2 decimal places
if they are not whole numbers. Hint: Start with the second row.
Q (units)
TFC ($)
AFC ($/unit)
TVC ($)
AVC ($/unit)
TC ($)
ATC ($/unit)
MC ($/unit)
11
$858
$158
12
$90
$140
Q3: Complete the following table. Hint: Start with the first
row.
Q (units)
TFC ($)
TVC ($)
TC ($)
AFC ($/unit)
AVC ($/unit)
ATC ($/unit)
MC ($/unit)
0
$1,800
–
–
–
–
1...

Given the following information about a firm’s costs,
complete the following chart. On one graph, show the TC, TFC and
TVC. On a separate graph, show the AFC, AVC, ATC, and
MC. You may use graph paper for this
question.
Q
TC
TFC
TVC
ATC
AFC
AVC
MC
0
--
50
10.00
100
9.00
150
8.00
200
12.00
7.00
250
6.00
300
7.00
350
8.00
400
9.00

Use the table below to answer the next 3 questions
Units of Output
Total Fixed Cost
Total Variable Cost
1
$1000
$200
2
450
3
800
4
1350
5
1950
8. Given the cost schedule above, it can be seen that the MC of
the 3rd unit produced is
(a)
$350
(c) $600
(b)
$550
(d) $800
9. AFC is
(a) constant at all
levels of
output
(c) the difference
between AVC and ATC
(b) less than MC when
MC...

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?...

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