2. Fill in the blanks: Q TFC TVC TC Ave Cost (Cost per unit of output) 0 _ _

ID: 1205749 • Letter: 2

Question

2. Fill in the blanks:

Q TFC TVC TC Ave Cost (Cost per unit of output)

0 ___ ___ ____ _______

1 50 ___ 120 _______

2 ___ 140 ____ _______

3 ___ ___ ____ 90

4 ___ 310 ____ ________

3. Referring to the table above, at which Q does DMR start happening? ___________

4. The table in Problem #2 above refers to a _____(short / long) run analysis, because

______________________________________________________.

(2) Working notes:

(a) TC = TFC + TVC, So TVC = TC - TFC

(b) ATC = TC / Q, So TC = ATC x Q

(3) Diminishing marginal returns start when MC starts increasing, i.e. at Q = 3

(4) This is a Short run analysis because fixed costs are present, while in long run all costs are variable.

Q TFC TVC TC ATC MC 0 50 50 1 50 70 120 120 70 2 50 140 190 95 70 3 50 220 270 90 80 4 50 310 360 90 90

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