A. Short-Run Costs of A Production Schedule. Calculate Table OUTPUT TFC TVC TC MC AFC AVC ATC 0 200 0 1 200 175 2 200 300 3 200 500 4 200 800 5 200 1,200 6 200 1,700 7 200 2,300 Determine the follow

  

A. Short-Run Costs of A Production Schedule.

Calculate Table 

  

OUTPUT

TFC

TVC

TC

MC

AFC

AVC

ATC

 

0

200

0

 

1

200

175

 

2

200

300

 

3

200

500

 

4

200

800

 

5

200

1,200

 

6

200

1,700

 

7

200

2,300

Determine the following:

1. What is the behavior of the TC as Output increases? Answer the same 

question in regard to the TFC. Why the difference?

2. What do the AFC, AVC and ATC curves do as regards increases in output? Is

there a difference in the AFC? Why?

3. What does the MC curve do with regard to Output? Why? What is the 

relationship between the MC curve and ATC, AVC curves? Would this

be important information for the Producer? 

B. Short-Run Cost of Production Schedule – Product X

(Perfect Competition)

  

OUTPUT

TFC

TVC

TC

MC

AVC

ATC

 

0

200

0

 

1

200

175

 

2

200

300

 

3

200

500

 

4

200

800

 

5

200

1,200

 

6

200

1,700

 

7

200

2,300

(A) Assume price = $250; calculate total profit/loss using TR – TC method.

  

OUTPUT

TR

TC

PROFIT/LOSS

 

0

 

1

 

2

 

3

 

4

 

5

 

6

 

7

(B) Calculate Output using the formula: Profit = (Price – ATC) x Q

Hint: construct a new table to find new output at the different levels of ATC values (in first table) and profit in table 2 when price is $250.

(C) Calculate Output using the formula: Profit = (Price – ATC) x Q

Hint: construct a new table to find new output at the different levels of ATC values (in first table) when price is $180. Also find new profit/loss values first.

(D) Calculate Output using the formula: Profit = (Price – ATC) x Q

Hint: construct a new table to find new output at the different levels of ATC values (in first table) when price is $140. Also find new profit/loss values first.

(E) Use price schedule to determine Q‘s. (Repeat the process for prices $350, $450,, $550, and $650 before presenting all the output computed at different price levels in the table below.

(F) What does short-run cost model tell you about the behavior of the firm in regard 

to MC and Price?