ECON 201 Lecture Notes - Lecture 7: Marginal Product, Perfect Competition, Hyperbola

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silvergiraffe603

18 May 2016

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Represents the lowest total dollar expense needed to produce each level of output q. tc rises as q rises. Always by definition: tc = fc + vc. Fixed cost: represents the total dollar expense that is paid out even when no output is produced; fixed cost is unaffected by any variation in the quantity of output. Variable cost: represents expenses that vary with the level of output, such as raw materials, wages, and fuel, and includes all costs that are not fixed. Is part of tc that grows with output. Denotes the extra or additional cost of producing 1 more unit of output. If mc is below ac, that means that the last unit produced costs less than the average cost of all the previous units produced. Marginal product: the extra output resulting from 1 extra unit of a specified input when all other inputs are held constant.

Related Questions

Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:

Output (Q)	Total Cost
0	25
1	50
2	100
3	120
4	155
5	190
6	250
7	390

a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?

tealwombat791

The following table represents short run cost-revenue information (in dollars) for a firm in a competitive market.

Q	P	TR	MR	MC	TC	Total Profit
0			N/A	N/A	600
1					700
2				80
3				50
4					860
5				20
6					1000
7					1040
8				60
9
10

(a) Fill in all the blanks above using the following information: The Market Price is $100 per unit of output, the VC of producing 9 units of output is $570, and the ATC of producing 10 units of output is $270

(b) Where does diminishing returns start? Explain your answer.

(d) In the Short Run, if this firm would go into production, determine the profit maximizing (or loss minimizing) level of output and profit amount.

(e) In the Short Run, if this firm would instead shutdown without going into production, determine its production amount and profit amount.

(f) Please determine the best course of action for this firm in the Short Run.

(g) Based on the data above, in the Long Run, explain what this firm should do.

brownseal366

a) What is the Fixed Cost of production (recall that it does not vary with output)

b) Calculate and graph (on the next page) Average Variable Cost, Average Fixed Cost, Average

Total Cost, and Marginal Cost.

Q VC TC

10 500 3000

20 800 3300

30 1350 3850

40 2300 4800

50 3750 6250

60 6000 8500

70 9450 11950

c) Explain why Average Variable Cost and Marginal Cost can fall initially,

but eventually rise.

d) If Fixed costs were to fall, how will that affect AFC, AVC, ATC, and

MC? Explain the intuition.

e) Explain the difference between the short-run and the long-run. How

does this concept relate to the data presented here?

f) Given a price of $145, how much of Good X will the perfectly competitive firm produce? How

much profit will the firm earn?

g) In the long run, if the market for X was made up of firms with the same cost structure,

what do you roughly expect the Perfect Competition market clearing price and per-firm

quantity to be? How much profit will they earn?

h) Given the following demand schedule, how much X would a monopoly produce, given the cost

table above? What price will they charge? How much profit will the firm earn?

Monopoly Demand:

P Q

$300 0

$270 10

$240 20

$210 30

$180 40

$150 50

$120 60

$90 70

ECON 201 Lecture Notes - Lecture 7: Marginal Product, Perfect Competition, Hyperbola

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