Answer to Question #158488 in Microeconomics for nfraser

Question

1.      Complete the table below  

Total Product Variable cost Total cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost Total Revenue Profit

Total Product Variable cost

0 0

1 60

2 90

3 130

4 180

5 250

6 340

7 490

8 680

Explain the relationship between Average Total Cost (ATC) and Marginal Cost (MC). 

Answer 1

Completion of table;

TP VC FC TC AFC AVC ATC MC TR PROFIT

0 0 60 60 60 60 120 -

1 60 60 120 60 60 75 60

2 90 60 150 30 45 120 30

3 130 60 190 20 43.3 63.3 40

4 180 60 240 15 45 60 50

5 250 60 310 12 50 62 70

6 340 60 400 10 56.67 66.67 90

7 490 60 550 8.58 70 78.57 150

8 680 60 740 7.5 85 85 190

From the given information, there was no information as regards the price of the product. Hence, it will be difficult to determine the vale of TP(Total Product) because it is express mathematically as TP multiply by price(TP*P).

In addition, it will also be difficult to determine the value of profit because profit is the difference between Total Revenue and Total Cost(TR-TC).

Relationship between Average Total cost and Marginal Cost

from the table above, it observed that when ATC falls, MC is less than ATC.ATC is falling till it becomes 63.3. In this case, MC falls more rapidly than ATC.

However, when ATC start rising, MC is greater than ATC. the shows that when ATC rise from 62 to 66.67, MC rises from 70 to 90.

In conclusion, there exist an inverse relationship between the Total product and the ATC, as TP was rising and ATC was decreasing.