Economics worksheet

Calculating Costs of Production Name __________________PRIVATE

1. Given the cost data in the table below, fill in the missing data in the spaces provided.

PRIVATE Q	FC	AFC	VC	AVC	TC	ATC	MC
0	55
1					85
2					110
3					130
4					160
5					210
6					280
7					370
8					480
9					610
10					760

2. Sketch the above data on the graph below, and label each curve.

Average variable cost, average fixed cost, average total cost, and Marginal cost

Cost per

Unit of

Output ($)

Quantity of output

3. What would happen to the cost curves (AFC, AVC, ATC) if wage rates dropped?

AFC:

AVC:

ATC:

4. What would you expect to happen to the short run ATC curves if this young firm began to expand and was experiencing lower average total costs as they expanded? (show this on the graph below, labeling the axes and curves accordingly.)

5. Explain the difference between the law of diminishing returns and economies of scale. How does the law of diminishing returns effect the average total cost curve? What are economies of scale (also called increasing returns to scale) and diseconomies of scale (also called decreasing returns to scale), and how do they effect the average total cost curve?