ECO100Y1 Lecture Notes - Lecture 2: Fixed Cost
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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.
Output |
Total Fixed Cost |
Total Variable Cost |
Total Cost |
Average Fixed Cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
0 |
Ā |
Ā |
$600 |
Ā |
Ā |
Ā |
Ā |
5 |
Ā |
Ā |
900 |
Ā |
Ā |
Ā |
Ā |
10 |
Ā |
Ā |
1,150 |
Ā |
Ā |
Ā |
Ā |
15 |
Ā |
Ā |
1,350 |
Ā |
Ā |
Ā |
Ā |
20 |
Ā |
Ā |
1,600 |
Ā |
Ā |
Ā |
Ā |
25 |
Ā |
Ā |
1,900 |
Ā |
Ā |
Ā |
Ā |
30 |
Ā |
Ā |
2,275 |
Ā |
Ā |
Ā |
Ā |
35 |
Ā |
Ā |
2,725 |
Ā |
Ā |
Ā |
Ā |
40 |
Ā |
Ā |
3,375 |
Ā |
Ā |
Ā |
Ā |
45 |
Ā |
Ā |
4,225 |
Ā |
Ā |
Ā |
Ā |
50 |
Ā |
Ā |
5,325 |
Ā |
Ā |
Ā |
Ā |
C. Identify the efficient scale of the firm. Explain your reasoning.
Ā
Part II. 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 the 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.
Table 1. shows the hourly production and Total Cost estimates for a new manufacturing firm wishing to enter the smart phone market. Fill in the blank cells in columns a., b., c., d., and e. on the table by computing the appropriate values.
Table 1. | ||||||
Smart cell phones produced in an hour | Total Cost (TC) | Variable Costs (VC) | Average Variable Costs (AVC) | Average Total Costs (ATC) | Average Fixed Cost (AFC) | Marginal Cost (MC) |
a. | b. | c. | d. | e. | ||
0 | $3,200 | n/a | n/a | n/a | n/a | |
15 | $3,525 | |||||
30 | $3,875 | |||||
45 | $4,250 | |||||
60 | $4,650 | |||||
75 | $5,075 | |||||
90 | $5,525 | |||||
105 | $6,725 | |||||
120 | $8,210 | |||||
135 | $9,950 |
Based on your calculations in completing the table in Question 2, what is this manufacturerĆ¢ĀĀs minimum cost output level? Explain your answer.