ECON 2300 Study Guide - Variable Cost, Hyperbola, Demand Curve

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12 Feb 2014

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Announcement: review materials for the final exam will be posted by the next week. Fixed, variable & total cost functions: f is the total cost to a firm of its short-run fixed inputs. Total cost curves: the firm"s total cost function is yc ycf v, for y > 0, the firm"s average total cost function is c(y) cv(y) F y: afc(y) is a rectangular hyperbola so its graph looks like In a short-run with a fixed amount of at least one input, the law of diminishing (marginal) returns must apply, causing the firm"s average variable cost of production to increase eventually: and atc(y) = afc(y) + avc(y) And since short-run avc(y) must eventually increase, atc(y) must eventually increase in a short-run. Marginal cost function: marginal cost is the rate-of-change of variable production cost as the output level changes. That is, ymc yc v y yc v (cid:242)= y. Area is the variable cost of making y" units.

Related Questions

Consider a firm whose technology is given by the production function: y = f (K,L) = (N+1)L + 2√K. Assume that input prices for labour, L, and capital, K, are w = 1 and r = 2 respectively. a)Find the firm’s short run total cost function assuming the firm cannot hire more workers nor fire its only worker, i.e. L = 1 is fixed.

b)Find the firm’s short run marginal cost, average variable cost and average fixed cost. Draw the three of them in the same graph. What is the short-run supply of the firm?

c)Find the firm’s long run total cost function, i.e. when all factors are variable.

d)Find the firm’s long run marginal cost and average cost. Draw them in the same graph. What is the long-run supply of the firm?

coralpug822

An economist estimated that the cost function of a single-product firm is:

C(Q) = 70 + 30Q + 20Q² + 10Q³.

Based on this information, show your work and determine the following:

a. The fixed cost of producing 10 units of output.

b. The variable cost of producing 10 units of output.

c. The total cost of producing 10 units of output.

d. The average fixed cost of producing 10 units of output.

e. The average variable cost of producing 10 units of output.

f. The average total cost of producing 10 units of output.

g. The marginal cost when Q = 10.

An economist estimated that the cost function of a single-product firm is:

C(Q) = 80 + 30Q + 25Q² + 5Q³.

Based on this information, determine the following:

a. The fixed cost of producing 10 units of output.

$

b. The variable cost of producing 10 units of output.

$

c. The total cost of producing 10 units of output.

$

d. The average fixed cost of producing 10 units of output.

$

e. The average variable cost of producing 10 units of output.

$

f. The average total cost of producing 10 units of output.

$

g. The marginal cost when Q = 10.

$

ECON 2300 Study Guide - Variable Cost, Hyperbola, Demand Curve

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