Microeconomics Homework

Chapter 11 Homework

Two point questions

A firm has fixed costs of $50 and variable costs as indicated in the table below. Use this information to answer questions 1, 2, and 3.

Total product	Total fixed cost	Total variable cost	Total cost	Average fixed cost	Average variable cost	Average total cost	Marginal cost
0 1 2 3 4 5 6 7	$____ _____ _____ _____ _____ _____ _____ _____	$ 0 20 36 60 90 130 180 250	$____ _____ _____ _____ _____ _____ _____ _____	$____ _____ _____ _____ _____ _____ _____	$____ _____ _____ _____ _____ _____ _____	$____ _____ _____ _____ _____ _____ _____	$____ _____ _____ _____ _____ _____ _____ _____
8	_____	340	_____	_____	_____	_____	_____

1. Complete the table using the Excel spreadsheet attached with the homework.

2. Using the Excel spreadsheet provided, show how the Table is altered if total fixed cost had been $90 rather than $50.

3. Using the Excel spreadsheet provided, show how the Table is altered if total fixed cost had been $90 rather than $50, and total variable cost had been forty percent lower at each level of output.

4. You have just been promoted to Chief Financial Officer for a firm that sells whatchacallits. Your firm has the following average-total-cost schedule:

Quantity	Average Total Cost
1,000 whatchacallits	$200
1,001 whatchacallits	$201

Your current level of production is 1000 whatchacallits, all of which have been sold. Someone calls, desperate to buy one of your whatchacallits. The caller offers you $800 for it. Should you accept the offer and make the 1,001st whatchacallit? Why or why not (SHOW YOUR WORK)?