MGEA02H3 Lecture 6: Week6-Cost-curves-spreadsheet
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1. Fill in the table below.
Q |
FC |
VC |
TC |
MC |
AFC |
AVC |
ATC |
0 |
20 |
- |
- |
- |
- |
||
1 |
1 |
||||||
2 |
3 |
||||||
3 |
4 |
||||||
4 |
12 |
16. Government Motors can produce cars according to the following schedule.
Labor |
Total Product |
Average Product |
Marginal Product |
0 |
0 |
- |
- |
1 |
? |
3 |
? |
2 |
? |
? |
4 |
What is the average product of labor when 2 units of labor are used in production?
(a) 4
(b) 3.5
(c) 7
(d) 1.5
17. Suppose demand is given by the equation QD = 12-3P. What is the price where demand is exactly unitary elastic?
(a) 1
(b) 2
(c) 3
(d) 4
18. When the price of good A is $20, the quantity of good B purchased is 400. When the price of good A is $40, the quantity of good B purchased is 750. Using the midpoint rule, the cross-price elasticity of demand between goods A and B is
(a) -0.91 and the goods are complements
(b) 0.91 and the goods are substitutes
(c) 1.10 and the goods are substitutes
(d) -2.20 and the goods are complements
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
Output (Q) | Total Cost |
0 | 25 |
1 | 50 |
2 | 100 |
3 | 120 |
4 | 155 |
5 | 190 |
6 | 250 |
7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?