Given the following short-run cost table (all numbers are in dollars) for Joe's widget business, which is in a perfectly competitive market; answer all questions.
Q
Quantity of Output
TC
Total Cost
TVC
Total Variable Cost
ATC
Average Total Cost
MC
Marginal Cost
0
$30,000
no answer
no answer
1
$1,000
2
$3,000
3
$12,000
4
$41,000
5
$9,800
6
$12,000
a) Fill in all of the missing numbers above (fill in the blanks â note there are no numbers for ATC and MC when Q=0 (also round to the nearest cent).
b) State the total fixed cost for this business.
c) At what unit of output does Joe's widget business start to experience diminishing returns? And state your reason for your answer.
d) If the market price is currently $5,000 per unit, what output would Joe produce in the short-run in order to maximize its profits (or to minimize its losses). Clearly explain your answer.
e) Please explain clearly what Joe will do in the long-run?
Given the following short-run cost table (all numbers are in dollars) for Joe's widget business, which is in a perfectly competitive market; answer all questions.
|
Q Quantity of Output |
TC Total Cost |
TVC Total Variable Cost |
ATC Average Total Cost |
MC Marginal Cost |
|
0 |
$30,000 |
|
no answer |
no answer |
|
1 |
|
|
|
$1,000 |
|
2 |
|
$3,000 |
|
|
|
3 |
|
|
$12,000 |
|
|
4 |
$41,000 |
|
|
|
|
5 |
|
|
$9,800 |
|
|
6 |
|
|
|
$12,000 |
a) Fill in all of the missing numbers above (fill in the blanks â note there are no numbers for ATC and MC when Q=0 (also round to the nearest cent).
b) State the total fixed cost for this business.
c) At what unit of output does Joe's widget business start to experience diminishing returns? And state your reason for your answer.
d) If the market price is currently $5,000 per unit, what output would Joe produce in the short-run in order to maximize its profits (or to minimize its losses). Clearly explain your answer.
e) Please explain clearly what Joe will do in the long-run?
Related textbook solutions
Related questions
Answer the following Questions for a Monopoly Firm.
| Price | Quantity | TR | MR | MC | TC | Profit |
| $400 | 0 | $2,000 | ||||
| 390 | 1 | $200 | ||||
| 380 | 2 | 2,360 | ||||
| 370 | 3 | 2,500 | ||||
| 360 | 4 | |||||
| 350 | 5 | 2,720 | ||||
| 340 | 6 | |||||
| 330 | 7 | 3,060 | ||||
| 320 | 8 | $250 | ||||
| 310 | 9 | 3,630 | ||||
| 300 | 10 | $400 | ||||
| 290 | 11 | $500 |
a) Fill in the missing information above for this Monopoly Firm. Note there are no numbers for MC and MR when Q=0.
To complete the table you need to know that the ATC of producing 4 units of output is $650 and that the Total Variable Cost of producing 6 units of output is $870.
b) State the Total Fixed Cost for this firm. Please explain how you got your answer.
c) At which unit of output does Diminishing Marginal Returns start? Please explain your answer.
d) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing output level. Please explain your answer using MC and MR.
e) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing price.
f) If this firm produces in the Short Run, state its profit maximizing/loss minimizing profit amount.
g) If this firm shuts down in the Short Run, determine its profit maximizing/loss minimizing profit amount. Please explain your answer.
h) What should this firm do in the Short Run in order to maximize its profits/minimize its loss (produce or shut down)? Please explain your answer using numbers.
i) Explain what this firm should do in the Long Run.
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.
