Part I. Consider the values in the following table for the Winsome Widget Factor

Question

Part I. Consider the values in the following table for the Winsome Widget Factory.
A. Fill in the formula for AFC, AVC, ATC, and MC at the top of the column in the gray section within the table.
B. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, and MC in the blue sections of the table.
Winsome Widget Factory
Output Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost
0 $600
5 900
10 1,150
15 1,350
20 1,600
25 1,900
30 2,275
35 2,725
40 3,375
45 4,225
50 5,325
C. Identify the efficient scale of firm. Explain your reasoning.
Consider the values in the following table for the Winsome Widget Factory.
Winsome Widget Factory
Output Long Run Average Total Cost
0 ------------------
5 170
10 110
15 85
20 83
25 78
30 75
35 75
40 80
45 82
50 97

a. Over what output levels do economics of scale occur? Explain.
b. Over what output levels do constant returns to scale occur? Explain.
c. Over what output levels do diseconomies of scale occur? Explain.
Thank you

Explanation / Answer

economies of sale occurrs when long run avg total cost is minimum. so it occurs from 0 to 35 constant returns occur when the ratio of avg total cost to output starts to increase so over 45 output level ie from 50 output level it returns remain constant dis economies of sale occurs above 35 variable cost = total cost - fixed costs..calculate it for each level of output average fixed cost find the average of all the fixed costs average variable cost avg of all variable costs ATC add Total fixed cost and total variable cost to get total cost..avg all those costs to get Avg Total cost marginal cost cost of producing 1 extra product..so (total cost - previous total cost) /(output - previous output) ....do this thing for the whole total cost table effecient scale of firm occurs when total marginal cost is minimum.. to find the missing values use the same logic given in the above explanation to get ur answer

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