Question

Total Product	Total Fixed Cost	Total Variable Cost
0	$150	$   0
1	150	50
2	150	75
3	150	105
4	150	145
5	150	200
6	150	270
7	150	360
8	150	475
9	150	620
10	150	800

Based on the cost data given in the accompanying table, which of the price-quantity tables correctly represents the firm's short-run supply schedule?

(a)		(b)		(c)		(d)
P	Qs	P	Qs	P	Qs	P	Qs
$20	1	$20	0	$20	0	$20	3
30	2	30	0	30	0	30	4
45	3	45	4	45	0	45	5
60	4	60	5	60	0	60	6
75	5	75	6	75	5	75	7
95	6	95	7	95	6	95	8
120	7	120	8	120	7	120	9
150	8	150	9	150	8	150	10

Multiple Choice

• table d

• table c

• table b

• table a

Answer 1

In the short-run supply schedule, fixed cost is ignored. So, marginal cost or the additional cost of a one more output is considered.

We can see tha the lowest marginal cost is $75-$50=$25

Thus, at $20 no quantity will be produced because for every unit, the marginal cost is more than $20, so table a and d are incorrect.

At $60, for 5 units of goods the average variable cost is 200/5=$40 and the marginal cost is 200-145=$55, so it will produce at least 5 units, so table c is incorrect

Thus, table b is correct.