ECON 1001 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost, Cost Curve

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rubyllama377

27 Mar 2018

School

Department

Economics

Course

ECON 1001

Professor

Erhardt

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Document Summary

Marginal cost: it is the change in total cost when an additional cost of output is produced. It is an addition made to the total cost due to the addition of one unit of output. It is affected by tvc and has nothing to do with fixed costs. Mc is an additional cost (corresponding to an additional unit of output) and additional cost by definition cannot be fixed cost, it can only be variable cost. Accordingly, the sum total of mc is tvc. Points about mc: from the above table we find that mc falls and then begins to rise. Falling mc is due to increasing returns to a factor . rising mc is in accordance with decreasing returns to a factor. Note: mp and mc are exactly opposite to each other: mc is not affected by tfc. Since tfc does not change with changes in the output.

Related Questions

Complete the following table.

Units of output (Q)	Total Cost (TC)	Total Fixed Cost (TFC)	Total Variable Cost (TVC)	Average Variable Cost (AVC)	Average Total Cost (ATC)	Marginal Cost (MC)
0	$100	$100	$0	NA	NA	NA
1	$130	$100
2	$150	$100
3	$160	$100
4	$172	$100
5	$185	$100
6	$210	$100
7	$240	$100
8	$280	$100
9	$330	$100
10	$390	$100

violethornet377

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
1
2
3
4
5
6
7
8
9
10

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

Q	FC	TVC	TC	AVC	ATC	MC
0				---	---	---
1						10
2
3				10		10
4

yellowsea-lion638

Each unit of input, X, costs $10. Fixed costs are $50, regardless of the level of output.

a.Complete the table below.

Labor, X	Total Output (TPP)	Marginal Physical Product (MPP)	TFC	TVC	TC	AFC	AVC	ATC	MC/unit
0	0
1	15
2	45
3	70
4	90
5	105
6	110
7	112

b.If the product can be sold for $0.75 per unit, what is the optimal level of output?

C. Find the level of profit at the optimal level of output. Explain what would happen if the firm produced one more unit of output in terms of marginal cost and marginal revenue.

ECON 1001 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost, Cost Curve

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