ECO 2023 Lecture Notes - Lecture 18: Demand Curve, Fixed Cost, Average Variable Cost
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Consider the following table of costs for the Winsome Widget Factory, which operates in a perfectly competitive market.Ā The market price faced by this firm is $6.00 per widget.
Output | Total Cost |
0 | 100 |
10 | 150 |
20 | 180 |
30 | 200 |
40 | 240 |
50 | 300 |
60 | 375 |
70 | 475 |
80 | 600 |
90 | 750 |
100 | 1,000 |
a. Fill in the formula for AFC, AVC, ATC, MC, TR, MR, and Total Profit.
b. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, MC, TR, MR, and Total Profit.
The cost and revenue structures for the only producer of X, Inc., are shown in this table.
Quantity |
TVC |
TC |
TFC |
ATC |
MC |
Ā |
Price |
TR |
MR |
0 |
0 |
15 |
Ā |
---- |
---- |
Ā |
20 |
0 |
---- |
1 |
11 |
Ā | Ā | Ā |
11 |
Ā |
17.5 |
Ā | Ā |
2 |
Ā |
32 |
Ā | Ā | Ā | Ā | Ā |
30 |
Ā |
3 |
Ā |
36.6 |
Ā | Ā | Ā | Ā |
13.5 |
Ā | Ā |
4 |
25 |
Ā | Ā | Ā | Ā | Ā | Ā |
48 |
Ā |
5 |
Ā |
44.5 |
Ā | Ā | Ā | Ā |
10.5 |
Ā | Ā |
6 |
36 |
Ā | Ā | Ā | Ā | Ā |
9 |
Ā | Ā |
7 |
45.2 |
Ā | Ā | Ā | Ā | Ā |
8 |
Ā | Ā |
a. Using the formulas that you are familiar with complete the cost and revenue structure in the table.
b. What are the firm's fixed costs? ______
c. What is the firm's s profit maximizing position? P = _____, Q = _____.
d. At each price level is the demand for product X elastic or inelastic? How do you know?
e. What is the profit or loss at the equilibrium position?
f. Is this firm producing at the lowest possible ATC? At what output level is the minimum point on the ATC?
g. Why is the firm not producing at the cheapest output level?