A. PRODUCTION COSTS Assume your business sells its products in a Perfectly Compe
ID: 1135517 • Letter: A
Question
A.PRODUCTION COSTS
Assume your business sells its products in a Perfectly Competitive Market. Let’s say that fixed costs (FC) are $50.
Q Labor
Q Output
FC
VC
TC
MC
AFC
AVC
ATC
0
0
$0.00
1
20
$35.00
2
60
$75.00
3
150
$110.00
4
260
$140.00
5
350
$175.00
6
420
$215.00
7
455
$260.00
8
420
$315.00
9
375
$390.00
10
300
$500.00
Reminder: We do not divide by zero! Please, leave those cells empty. Use three digits beyond the decimal point for greater accuracy here
Use the Table to find the dollar distance between the TC and VC curves.
Answer: $
Q Labor
Q Output
FC
VC
TC
MC
AFC
AVC
ATC
0
0
$0.00
1
20
$35.00
2
60
$75.00
3
150
$110.00
4
260
$140.00
5
350
$175.00
6
420
$215.00
7
455
$260.00
8
420
$315.00
9
375
$390.00
10
300
$500.00
Explanation / Answer
(a) Dollar distance between TC and VC curves = Fixed cost (FC) = $50
(b) Working notes (note that Q refers to Output):
(i) TC = VC + FC = VC + 50
(ii) MC = Change in TC / Change in Q
(iii) AFC = FC / Q
(iv) AVC = VC / Q
(v) ATC = TC / Q
Therefore:
Labor Output (Q) FC VC TC MC AFC AVC ATC 0 0 50 0 50 1 20 50 35 85 1.750 2.500 1.750 4.250 2 60 50 75 125 1.000 0.833 1.250 2.083 3 150 50 110 160 0.389 0.333 0.733 1.067 4 260 50 140 190 0.273 0.192 0.538 0.731 5 350 50 175 225 0.389 0.143 0.500 0.643 6 420 50 215 265 0.571 0.119 0.512 0.631 7 455 50 260 310 1.286 0.110 0.571 0.681 8 420 50 315 365 -1.571 0.119 0.750 0.869 9 375 50 390 440 -1.667 0.133 1.040 1.173 10 300 50 500 550 -1.467 0.167 1.667 1.833Related Questions
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