Week 6: In Class – Costs of Production
Qty S
0
1
2
3
4
5
6
7
8
9
10
Tot
Cost
Fixed
cost
Var
cost
Avg
Avg FC VC
Avg
TC
MC
$10
$15
Tot
Rev Profit Tot Rev Profit
15
25
31
35
40
46
54
63.5
76
90
106
1. Using the above data, first compute all of the relevant cost numbers, including
 Fixed Costs
 Variable Cost
 Average Fixed Costs
 Average Variable Costs
 Average Total Costs
 Marginal Cost
2. Compute Total Revenue and Profit
a. If the price is $10 per unit
b. If the price is $15 per unit
c. Find the profit maximizing output for each price
d. What is the relationship between price and marginal cost at the profit maximizing
level of output
e. What would be the minimum price, in the short-run (fixed costs), that a firm would
accept in order to produce any output?
f. What would be the minimum price, in the long-run, that a firm would need to enter
this industry and produce any output?
Profit
Use the figure for the question(s) below.
23) Which shows long- and short-run average costs for a firm. Each shortrun average total cost curve corresponds with a different level of
A) technology.
B) minimum efficient scale.
C) raw materials.
D) labor.
E) capital.
23) ______
24) Which shows long- and short-run average costs for a firm. If this firm
expects to produce 200 units, in the long run, it should build a factory
that corresponds with
A)
.
B)
.
C)
.
D) LRAC.
E)
24) ______