Answer to Question #209293 in Microeconomics for Gerald

Question

q TC TFC TVC AVC ATC MC

0 RM50

1 70

2 80

3 90

4 110

5 140

6 175

7 220

8 280

9 360

10 450

1.1) Complete the table. (4M)

1.2) Draw a graph for each AVC, ATC and MC on one graph. (2M)

1.3) Suppose market price is RM20. How much will the firm produce in the short run? How much are total profits? (2M)

1.4) Suppose market price is RM60. How much will the firm produce in the short run? How much are total profits? (2M)

Answer 1

Total fixed cost remain same at each level of output.

TFC = 50

Total variable cost is calculated as;

$TVC = TC - TFC$

Average variable cost is the variable cost per unit of output;

$AVC = \frac {TVC} {q}$

Average total cost is the total cost per unit of output;

$ATC = \frac {TC} {q}$

Marginal cost is the additional cost incurred when one more unit of output is produced.

$MC = \frac {Change in TC} {Change in output}$