ECO 4-1

Assignment:

1. Give a brief summary of economic costs.

2. Suppose a firm operating at the minimum point of its short-run average total cost curve, so that marginal cost equals average total cost. Under what circumstances would it choose to alter the size of its plant? Explain.

3. In the short-run, why might a firm still operate even when there is a loss?

4. Suppose a firm is producing 1,000 units of output (Q). Its average fixed costs are $50. Its average variable costs are $25. What is the total cost (TC) of producing 1,000 units of output (Q)? If the price (P) of the good is $100 what is the total revenue? What is the total profit?

Expectations:

Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.

Length: 4–5 pages double-spaced and typed

The following items will be assessed in particular:

1. Your ability to understand the relationship between costs and production.

2. Some in-text references to the modular background material (APA formatting required) with Website information.

http://www.inflateyourmind.com/pdfs/microeconomics.pdf

The essay should address each element of the assignment. Remember to support your answers with solid references including the case readings.