ECON 1 Study Guide - Midterm Guide: Marginal Utility, Market Power, Opportunity Cost
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A firm's fixed costs for 0 units of output and its average total cost of producing different output levels are summarized in the table below. Complete the table to find the fixed cost, variable cost, total cost, average fixed cost, the average variable cost, and marginal cost at all relevant levels of output.
Instruction: Round your answers for Average Fixed Cost (AFC) and Average Variable Cost (AVC) to 2 decimal places.
Q |
FC |
VC |
TC |
AFC |
AVC |
ATC |
MC |
0 |
$15,000 |
Ā | Ā |
- |
- |
- |
- |
100 |
Ā | Ā | Ā | Ā | Ā |
300 |
Ā |
200 |
Ā | Ā | Ā | Ā | Ā |
200 |
Ā |
300 |
Ā | Ā | Ā | Ā | Ā |
175 |
Ā |
400 |
Ā | Ā | Ā | Ā | Ā |
225 |
Ā |
500 |
Ā | Ā | Ā | Ā | Ā |
325 |
Ā |
600 |
Ā | Ā | Ā | Ā | Ā |
400 |
Ā |
Given following Price and Total Cost functions:
P = 120 - 7Q
TC = 40 + 70Q - 10Q2 + 0.6Q3
Where P = price, and Q is output.
Fill in the table below and answer the questions below the table.
Q |
P |
FC |
TVC |
TC |
TR |
Profit |
0 |
Ā | Ā | Ā | Ā | Ā | Ā |
1 |
Ā | Ā | Ā | Ā | Ā | Ā |
2 |
Ā | Ā | Ā | Ā | Ā | Ā |
3 |
Ā | Ā | Ā | Ā | Ā | Ā |
4 |
Ā | Ā | Ā | Ā | Ā | Ā |
5 |
Ā | Ā | Ā | Ā | Ā | Ā |
6 |
Ā | Ā | Ā | Ā | Ā | Ā |
7 |
Ā | Ā | Ā | Ā | Ā | Ā |
8 |
Ā | Ā | Ā | Ā | Ā | Ā |
9 |
Ā | Ā | Ā | Ā | Ā | Ā |
10 |
Ā | Ā | Ā | Ā | Ā | Ā |
If your company's goal is to maximize profit, answer the following questions below:
What price will you charge for your product?
What quantity will you produce?
And what would be your maximum profit or minimum loss at the price and output you chose?
2. If your company's goal is to maximize total revenue, answer the following questions below:
What price will you charge for your product?
What quantity will you produce?
And what would be your maximum total revenue at the price and output you chose? (3 points)
Question 3
Given a firm with the following cost data, fill in the table below.
Q = OUTPUT TFC = Total Fixed Cost AVC = Average Variable Cost ATC = Average Total Cost TVC = Total Variable Cost MC = Marginal Cost TC = Total Cost
Ā
Q |
FC |
TVC |
TC |
AVC |
ATC |
MC |
0 |
Ā | Ā | Ā |
--- |
--- |
--- |
1 |
Ā | Ā | Ā | Ā | Ā |
10 |
2 |
Ā | Ā | Ā | Ā | Ā | Ā |
3 |
Ā | Ā | Ā |
10 |
Ā |
10 |
4 |
Ā | Ā | Ā | Ā | Ā | Ā |
1. Profit Maximization under Monopoly.
1.1. Fill in the blanks in the following table using Excel formulas:
Q |
P |
TR |
TFC |
TVC |
AVC |
TC |
AC |
Ā |
MR |
MC |
Ā |
0 |
Ā | Ā |
311,250 |
Ā |
0.00 |
Ā | Ā | Ā | Ā | Ā | Ā |
10,000 |
Ā | Ā | Ā | Ā |
12.00 |
Ā | Ā | Ā | Ā | Ā | Ā |
20,000 |
Ā | Ā | Ā | Ā |
11.50 |
Ā | Ā | Ā | Ā | Ā | Ā |
30,000 |
Ā | Ā | Ā | Ā |
12.67 |
Ā | Ā | Ā | Ā | Ā | Ā |
40,000 |
Ā | Ā | Ā | Ā |
14.25 |
Ā | Ā | Ā | Ā | Ā | Ā |
50,000 |
Ā | Ā | Ā | Ā |
16.00 |
Ā | Ā | Ā | Ā | Ā | Ā |
60,000 |
Ā | Ā | Ā | Ā |
17.83 |
Ā | Ā | Ā | Ā | Ā | Ā |
70,000 |
Ā | Ā | Ā | Ā |
19.71 |
Ā | Ā | Ā | Ā | Ā | Ā |
The demand function is given by: P=50-0.00025Q
1.2. Construct line charts for the Average Cost (AC), Average Variable Cost (AVC), Marginal Cost (MC), Marginal Revenue (MR), and Average Revenue (AR) on a Cartesian coordinate system.