ECON 1B03 Lecture Notes - Lecture 7: Average Variable Cost, Marginal Revenue, Marginal Cost

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ECON 1B03 Lecture 5: Econ1B03 Lecture5 Elasticity

ECON 1B03 Lecture Notes - Lecture 7: Average Variable Cost, Marginal Revenue, Marginal Cost

ECON 1B03 Lecture Notes - Lecture 8: Perfect Competition, Taipei Metro, Fixed Cost

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Chapter 7: production and costs & chapter 8: perfect competition. *economic profit = total revenue total opportunity cost (explicit costs + implicit. *total fixed cost, tfc = do not vary with the amount of output produced. *average fixed costs, afc = the fixed cost per unit of output = *total variable costs, tvc = do vary with the quantity if output produces. *average variable costs, avc = the variable cost per unit of output = *total cost, tc = total fixed costs + total variable costs = tfc + avc. *average total cost, atc = the total cost per unit of output = *increasing return to scale, irs: if you increase the quantity of output produced, lrac falls (over the range from 0 to q1). *decreasing returns to scale, drs: if you increase the quantity of output produced, Lrac rises (for any output greater than q2).

Related Questions

Given following Price and Total Cost functions:

P = 120 - 7Q

TC = 40 + 70Q - 10Q² + 0.6Q³

Where P = price, and Q is output.

Fill in the table below and answer the questions below the table.

Q	P	FC	TVC	TC	TR	Profit
0
1
2
3
4
5
6
7
8
9
10

If your company's goal is to maximize profit, answer the following questions below:

What price will you charge for your product?

What quantity will you produce?

And what would be your maximum profit or minimum loss at the price and output you chose?

2. If your company's goal is to maximize total revenue, answer the following questions below:

What price will you charge for your product?

What quantity will you produce?

And what would be your maximum total revenue at the price and output you chose? (3 points)

Question 3

Given a firm with the following cost data, fill in the table below.

Q = OUTPUT TFC = Total Fixed Cost AVC = Average Variable Cost ATC = Average Total Cost TVC = Total Variable Cost MC = Marginal Cost TC = Total Cost

Q	FC	TVC	TC	AVC	ATC	MC
0				---	---	---
1						10
2
3				10		10
4

yellowsea-lion638

Each unit of input, X, costs $10. Fixed costs are $50, regardless of the level of output.

a.Complete the table below.

Labor, X	Total Output (TPP)	Marginal Physical Product (MPP)	TFC	TVC	TC	AFC	AVC	ATC	MC/unit
0	0
1	15
2	45
3	70
4	90
5	105
6	110
7	112

b.If the product can be sold for $0.75 per unit, what is the optimal level of output?

C. Find the level of profit at the optimal level of output. Explain what would happen if the firm produced one more unit of output in terms of marginal cost and marginal revenue.

Redstone Clayworks Inc. is located in Sedona, Arizona, and manufactures clay fire pits for patios. They are one of about two dozen firms around the world that manufacture and sell clay fire pits for retailers such as Home Depot, Lowe's, Front Gate, and other upscale home product chains. There is virtually no product differentiation. A clay fire pit is a clay fire pit.

The spreadsheet below gives some of Redstone's production cost data.

Assume that the world market demand and supply curves for clay fire pots intersect at $190 per unit.

Q	TC	TFC	TVC	AFC	AVC	ATC	SMC	TR	MR	Profit	Average	Profit
											Profit	Margin
0	7000	7000	NIL	NIL	NIL	NIL	NIL	0	NIL	-7000	NIL	nil
100	14000	7000	7000	70	70	140	70	19000	190	5000	50	26%
200	23000	7000	16000	35	80	115	90	38000	190	15000	75	39%
300	32000	7000	25000	23.33	83.33	106.67	90	57000	190	25000	83.33	44%
400	43000	7000	36000	17.5	90	107.5	110	76000	190	33000	82.5	43%
500	52000	7000	45000	14	90	104	90	95000	190	43000	86	45%
600	74000	7000	67000	11.67	111.67	123.33	220	114000	190	40000	66.67	35%
700	97000	7000	90000	10	128.57	138.57	230	133000	190	36000	51.43	27%
800	111000	7000	104000	8.75	130	138.75	140	152000	190	41000	51.25	27%
900	132000	7000	125000	7.78	138.89	146.67	210	171000	190	39000	43.33	23%
1000	152000	7000	145000	7	145	152	200	190000	190	38000	38	20%

AFC = total fixed cost/total output.

AVC = total variable cost/total output.

ATC = total cost/total output.

MC = change in total cost/change in output.

Total revenue = price * quantity. And given that the demand and supply intersect at $190, which implies that the equilibrium price is $190 because the point where the demand equals the supply determines the price.

MR = change in total revenue/change in output.

Profit = total revenue - total cost.

Average profit = total profit/total output.

Profit margin = total profit/total revenue*100 or (revenue - cost)/revenue*100.

Question:

a. What level of output should the manager of Redstone choose to produce? Explain your choice in 50-100 words.

b. Make a copy of your spreadsheet and triple the fixed costs to 21,000. How does this change your answer to question a? Explain your result in 50-100 words.

whitehound166

ECON 1B03 Lecture Notes - Lecture 7: Average Variable Cost, Marginal Revenue, Marginal Cost

ECON 1B03 Lecture 5: Econ1B03 Lecture5 Elasticity

ECON 1B03 Lecture Notes - Lecture 7: Average Variable Cost, Marginal Revenue, Marginal Cost

ECON 1B03 Lecture Notes - Lecture 8: Perfect Competition, Taipei Metro, Fixed Cost

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