Question

3. The following table gives the short-run and long-run total cost for various levels of output of Consolidated National Aeme, Inc. Q TC: TC TFC TVC AFC AVC MC 0 0 350 300 400 400 435 465 465 495 505 5 560 560 6 600 635 7 700 735 a. Which column, TCi or TC2, represents a long-run total cost, and which represents a short-run total cost? How do you know? b. For each level of output, find short-run TFC, TVC, AFC, AVC, and MC (ignore the long-run column for this part). g

Answer 1

a) TC2 represents short run cost function and TC1 represents long run cost as there is no fixed cost when output = 0 in the long run whereas there would be fixed cost when output = 0 in the short run.

b)

Q	TC2	TFC	TVC	AFC	AVC	MC
0	350	350	0
1	400	350	50	350	50	50
2	435	350	85	175	42.5	35
3	465	350	115	116.6667	38.33333	30
4	505	350	155	87.5	38.75	40
5	560	350	210	70	42	55
6	635	350	285	58.33333	47.5	75
7	735	350	385	50	55	100