Question

Sed Fredytore in the one w were just to Toket FE Average ey

i added two photos under the original photo and it's visible in those photos

Answer 1

a) The complete table is given below:

Output Fixed cost Variable cost Total cost Average fixed cost (Fixed cost/quantity) Average variable cost (Variable cost/quantity) Average total Marginal cost cost(Average fixed (change in total cost + average cost/change in variable cost) quantity) 1 55 50 50 45 2 3 4 50 50 50 50 50 50 105 150 180 230 290 355 425 500 100 130 180 240 305 375 450 50 25 16.66666667 12.5 10 8.333333333 7.142857143 6.25 55 50 43.33333333 45 48 50.83333333 53.57142857 56.25 5 105 75 60 57.5 58 59.16666667 60.71428571 62.5 30 50 60 65 70 09 7 00 75

The formula for various costs are given in the parenthesis.

B) Costs are plotted in figure 1. S shows the shutdown price (which is the minimum of average variable cost). B depicts the break even point and the supply curve is nothing but the portion of MC curve that is above the average variable costs and is indicated by green highlight in figure 1

cost curves 120 100 80 B 60 40 ys 20 0 1 2 3 4 5 6 7 8 9 AFC AVC ATC MC FIGURE 1

c) Rent = $20

Labor and precious gems = $180

Income that he used to earn before = $30

Rent ($20) and cost of Labor and precious gems ($180) are the explicit costs. Income that he used to earn before ($30) is the implicit cost.

FIxed cost = rent. Variable cost = Labor and precious gems

Frodo's revenue = $210

Total accounting costs = explicit costs = rent + labor = $20+$180 = $200

Accounting profit = total revenue - accounting cost = $210-$200 = $10

Total economic profits = explicit costs+implicit costs = rent + labor + income that he used to earn = $20+$180+$30 = $230

Economic profit = total revenue - economic costs = $210 - $230 = -$20

d) Characteristics of a purely competitive ring market structure:

• There are a large number of buyers and sellers. Therefore a single buyer and seller cannot infulence the prices.
• price is equated to marginal cost, or P =MC
• Normal profits are realized in perfect competitive market

In addition, the structure is a price taker.

As per the guidelines provided, first four questions have to be answered. Thank you.