ECO 2023 Lecture Notes - Lecture 26: Fixed Cost

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tanwasp406

24 Nov 2017

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A time period so short that a firm is unable to vary some of its factors of production. What are the 7 categories of costs that a business faces: total fixed costs (tfc, average fixed costs (afc, total variable costs (tvc, average variable costs (avc, total costs (tc, average total cost (atc, marginal costs (mc) The sum of the costs that do not vary with output. (ex): insurance premiums, property taxes, rent. True or false: fixed costs will remain unchanged as output rises or falls in the short run. Total fixed costs (tfc) divided by the # of units produced (q). True or false: average fixed costs (afc) always decline with output. The sum of those costs that vary with output. (ex): wages, raw materials. True or false: variable costs go up dramatically with low levels of output, then diminish, then go up again @ high levels of output.

Related Questions

A. Fill in the formula for AFC, AVC, ATC, and MC at the top of the column in the gray section within the table. B. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, and MC in the blue sections of the table.

Output	Total Fixed Cost	Total Variable Cost	Total Cost	Average Fixed Cost	Average Variable Cost	Average Total Cost	Marginal Cost
0			$600
5			900
10			1,150
15			1,350
20			1,600
25			1,900
30			2,275
35			2,725
40			3,375
45			4,225
50			5,325

C. Identify the efficient scale of the firm. Explain your reasoning.

Part II. Consider the values in the following table for the Winsome Widget Factory

Winsome Widget Factory
Output	Long-Run Average Total Cost
0	------------------
5	170
10	110
15	85
20	83
25	78
30	75
35	75
40	80
45	82
50	97

a. Over what output levels do the economics of scale occur? Explain.

b. Over what output levels do constant returns to scale occur? Explain.

c. Over what output levels do diseconomies of scale occur? Explain.

salmonsalmon139

Production/Cost Exercises 1. The following is a short-run production table for a firm with labor as its only variable input. Wage = $ 310 Capital = 100 Capital Price= $20 Product Price= $65

Labor Output

0 0

1 50

2 110

3 160

4 200

5 230

6 250

7 260

8 265

9 260

10 250

A. Determine the following measures at all levels of output: MPL, APL, TFC, TVC, TC, TR, AVC, ATC, AFC, MC, PROFIT.

B. At what level of output is the profit maximized?

C. What kind of observations can you make about MC, price, average total cost, and profit?

ceruleanmosquito986

The total cost of production equals

Select one:

a. average total cost + average variable cost

b. average total cost + average fixed cost

c. average variable cost + average fixed cost

d. total fixed cost + total variable cost

e. marginal cost + total variable cost

If a firms output equals 10, product price equals $5.00, TFC = $8.00, and TVC = $60.00, then the firms profit would equal

Select one:

a. $.80

b. $1.80

c. $80.00

d. -$16.80

e. -$18.00

The difference between variable cost and fixed cost is that

Select one:

a. fixed cost is paid even when there is no output

b. fixed cost is always falling as output increases

c. variable cost only increases for a while and then it decreases

d. fixed cost is always less than variable cost

e. fixed cost is not paid once production begins

A local bagel company plans to keep and maintain its bagel factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period

Select one:

a. are short-run decisions

b. are long-run decisions

c. involve only maintenance of the factory

d. are zero, since the cost decisions were made at the beginning

e. involve both fixed and variable cost

Total cost divided by quantity of output is

Select one:

a. average variable cost

b. average total cost

c. average fixed cost

d. marginal cost

e. total variable cost

ECO 2023 Lecture Notes - Lecture 26: Fixed Cost

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