(10 pts) A firm has the following short run total costs, where Q is output and...
- (10 pts) A firm has the following short run total costs, where Q is output and TC is total cost:
|
Q |
TC |
|
0 |
$ 100 |
|
1 |
110 |
|
2 |
130 |
|
3 |
160 |
|
4 |
200 |
|
5 |
250 |
|
6 |
310 |
|
7 |
380 |
|
8 |
460 |
|
9 |
550 |
|
10 |
650 |
|
11 |
760 |
- What is total fixed cost equal to?
- What is average total cost at Q = 3?
- What is average variable cost at Q = 6?
- What is marginal cost at Q = 8?
- At Q=8, is the firm operating under increasing or decreasing returns? Why?
Homework Answers
a.
Total fixed cost is that cost which is born when there is zero unit of output produced.
Hence TFC=$100
b.
When Q=3
ATC=TC\Q
=160\3
=53.33
c.
When Q=6
TVC=TC-TFC
=310-100
=210
AVC=TVC\Q
=210\6
=35
d.
MC=TCn-TCn-1
when Q=8
MC=TC8- TC7
=460-380
=80
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