ECON 160 Lecture 30: Lecture #30

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indigoraven449

2 Dec 2016

School

Binghamton University

Department

Economics

Course

ECON 160

Professor

Susan W.Hanes

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Document Summary

Avc all derived fromt the total-cost curve if you know the fixed cost. Atc slope = 0 because inflection point qpm= profit maximizing quantity. > +1(as firm makes 1 more unit) Homogenous good w/ many buyers and many sellers. For competitive markets, the marginal revenue = price. Everytime firm makes 1 unit extra cost given by marginal cost. Profit maximizing condition: choose q such that mc=mr=p. More firms entering shifts : mc b. atc c. demand d. supply. More firms exiting shifts : mc b. atc c. demand d. supply. Firm will leave market in long-run yes, makes sense to produce at pt a in short run b/c mc=mr. Firm make reasonable profit but 0 economic profit. Firms will operate if make a loss in the short-run. Short run shutdown: price falls below average cost. Firms will operate when under price below atc in short-run because covering some fixed costs.

Related Questions

26. Which of the following is an INCORRECT statement about average total cost (ATC)? a. ATC = (VC + FC)/Q, b. ATC = TC/Q. C. ATC = AVC + AFC d. ATC = MC if MC is at a minimum. e. All of the above are correct.

26) Consider a firm's short-run cost curves. When capital is a fixed factor, a rise in the cost of labour A) shifts the marginal cost curve upwards. B) shifts the AVC curve down. C) shifts the total product curve downwards. D) leaves the MC curve unchanged. E) leaves the ATC curve unchanged.

Answer the following questions pertaining to the graph.

1. What is the shape of the AVC and ATC curves? What economic law accounts for this shape? How do you know this?

2. What is the shape of the MC curve? Why does it have this shape? How do you know this?

3. What do you know about the values of AVC and ATC at the points where MC crosses them?

4. Is the AVC higher than the ATC or lower than it? How do you know this?

5. Is the costs in the short run or the long run? How do you know this?

6. Assume the company above is in a Perfect Competition Industry: If the price of the product is $20 that is sold at, what will be the profits and how many will be sold at that price? Can the company raise the price?

7. Again in a Perfect Competition Industry: What would the profit situation be at a price of $30, how much to sell at that price?

8. With the Perfect Competition industry: What would the profit situation be at a price of $10, how much to sell at that price?

9. What are the characteristics of a perfect competition company and industry?

Following is the complete table -

Q	FC	VC (TC-FC)	TC	AFC (FC/Q)	AVC (VC/Q)	ATC (TC/Q)	MC (TC_n-TC_n-1)
0	10	0	10	-	-	-	-
1	10	10	20	10	10	20	10
2	10	18	28	5	9	14	8
3	10	23	33	3.33	7.67	11	5
4	10	33	43	2.5	8.25	10.75	10
5	10	48	58	2	9.6	11.6	15
6	10	68	78	1.67	11.33	13	20
7	10	98	108	1.43	14	15.42	30
8	10	148	158	1.25	18.5	19.75	40

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ECON 160 Lecture 30: Lecture #30

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