Economics 221 Lecture 2: Test 2
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22 Dec 2018
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The power of a good or service to fulfil/satisfy a want. Marginal utility (change in utility) / (change in quantity) The longer you use a good, the less utility you get from it. Water, a necessity, is cheap; diamonds, a useless item, are. Exactly cover your accounting and opportunity costs. More than cover your accounting and opportunity costs. Don"t cover your accounting and opportunity costs. Fixed cost doesn"t change as output changes. All costs are variable in the long run. Average total cost (atc) = tc/q or afc+avc. Marginal cost (mc) = change in tc/change in quantity -> change in vc/change. Marginal cost is the first derivative or the total cost in q. Economies of scale: double all inputs, more than double output. Constant returns to scale: double all inputs, double output. Diseconomies of scale: double all inputs, output less than doubles. Economies of scope: efficiencies from selling a variety of products.
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Related Questions
- Complete Table 1. Summarize your calculations and use Microsoft Excel.
- Using Excel, draw one graph showing average fixed costs, average variable costs, average total costs, marginal revenue, and marginal costs.
- Using the data in the table and on your graph, what is the profit maximizing, or loss minimizing level of output? Explain and justify your answers.
- What is a normal profit? What is an economic profit? Explain your answer using examples. Are normal profits being earned in this example? Are economic profits present for this firm in this example? Explain your answers.
- Given the data in the table and the graph, how could you determine or identify the optimal plant size?
- What is the difference between explicit and implicit cost? Explain your answers.
- How would we determine if a cost is a fixed cost or a variable cost?
Output | Average Fixed cost | Average Variable Cost | Average Total Cost | Marginal Cost | Price | Total Revenue | Marginal Revenue |
0 | $ 345.00 | ||||||
1 | $ 180.00 | $ 135.00 | $ 315.00 | $ 300.00 | |||
2 | $ 90.00 | $ 127.50 | $ 217.50 | $ 249.00 | |||
3 | $ 60.00 | $ 120.00 | $ 180.00 | $ 213.00 | |||
4 | $ 45.00 | $ 112.50 | $ 157.50 | $ 189.00 | |||
5 | $ 36.00 | $ 111.00 | $ 147.00 | $ 165.00 | |||
6 | $ 30.00 | $ 112.50 | $ 142.50 | $ 144.00 | |||
7 | $ 25.71 | $ 115.70 | $ 141.41 | $ 126.00 | |||
8 | $ 22.50 | $ 121.90 | $ 144.40 | $ 111.00 | |||
9 | $ 20.00 | $ 130.00 | $ 150.00 | $ 99.00 | |||
10 | $ 18.00 | $ 139.50 | $ 157.50 | $ 87.00 |