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Week 2 Assignment Problem

A fixed plant produces a commodity that requires only one variable input. Total Fixed Cost is $220 per period. Units of variable input cost $100 per unit.

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229 views2 pages

Week 2 Assignment Problem

A fixed plant produces a commodity that requires only one variable input. Total Fixed Cost is $220 per period. Units of variable input cost $100 per unit.

Uploaded by

bb23bb
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problems:

1. Below is hypothetical data for a manufacturer which possesses a fixed plant producing a commodity that requires only one variable input. Total Product is given. Total Fixed Cost is $220 per period. Units of the variable input cost $100 per unit of variable input.. Complete the following table.

Units of Var. Input

T.P.

A.P.

M.P.

T.F.C.

T.V.C.

T.C.

A.F.C.

A.V.C.

A.T.C.

M.C

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

100 250 410 560 700 830 945 1050 1146 1234 1314 1384 1444 1494 1534 1564 1584

100.00

125.00 150.00 136.67 160.00 140.00 150.00 140.00 140.00 138.33 130.00 135.00 115.00 131.25 105.00 127.33 123.40 119.45 115.33 111.08 106.71 102.27 97.75 93.18 96.00 88.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00

18

1594

88.56

10.00

A. When MP is >, what is happening to: 1) MC 2) AVC B. When MC first begins to fall, does AVC begin to rise? C. What is the relation between MC and AVC when MP = AP? D. What is happening to AVC while AP is increasing? E. Where is AVC when AP is at its maximum? What happens to AVC after this point? F. What happens to MC after the point where it equals AVC? 1) How does it compare with AVC thereafter? 2) What is happening to MP thereafter? 3) How does MP compare with AP thereafter? G. What happens to TFC as output is increased? H. What happens to AFC as: 1) MP increases? 2) MC decreases? 3) MP decreases? 4) MC increases? 5) AVC increases? I. How long does AFC decrease?

J. What happens to ATC as? 1) MP increases 2) MC decreases 3) AP increases 4) AVC decreases K. Does ATC increase? 1) As soon as the point of diminishing marginal returns is passed? 2) As soon as the point of diminishing average returns is passed?

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