# Analyzing and Calculating Production Costs

Please refer attached file for better clarity of tables and expressions.

1. Consider the following table of numbers, which represents demand and cost conditions for a competitive firm.

(a) Fill in the missing values.

(b) What level of output should the firm produce? Explain.

P = MR Q TFC AFC TVC AVC TC ATC MC TR Total Profit

600 0 - 0 - 570 -

600 1 570 240

600 2 430

600 3 670

600 4 960

600 5 1350

600 6 1840

600 7 2430

600 8 3120

600 9 3910

600 10 4800

2. You own four firms that produce different products. The following table summarizes the conditions in each firm. After calculating the missing numbers for each firm, make one of the following four decisions regarding operations in each firm, and explain why a particular decision is reached.

(a) continue producing the same output level

(b) shut down

(c) increase output

(d) decrease output

Firm P MR TR Q TC MC ATC AVC

A 11 8 20 200 5 9

B 3 1 100 1.5 2.5 2

C 4 2 200 2 7 5

D 8 5 10 70 5 6

3. Given the market share information in the table below, calculate the four firm concentration ratio and the Herfindahl index.

Firm

Number Market Share

(%)

1 35

2 25

3 15

4 15

5 10

https://brainmass.com/economics/output-and-costs/analyzing-calculating-production-costs-254039

#### Solution Preview

Please refer attached file for better clarity of tables and expressions.

Solutions:

1. Consider the following table of numbers, which represents demand and cost conditions for a competitive firm.

(a) Fill in the missing values.

P=MR Q TFC AFC TVC AVC TC ATC MC TR Total Profit

600 0 570 - 0 - 570 - - 0 -570

600 1 570 570 240 240.0 810 810.0 *240 600 -210

600 2 570 285 430 215.0 1000 500.0 190 1200 200

600 3 570 190 670 223.3 1240 413.3 240 1800 560

600 4 570 143 960 240.0 1530 382.5 290 2400 870

600 5 570 114 1350 270.0 1920 384.0 390 3000 1080

600 6 570 95 1840 306.7 2410 401.7 490 3600 1190

600 7 570 81 2430 347.1 ...

#### Solution Summary

There are 3 problems. Solutions to first two problems depicts the methodology and formulas to calculate and analyze various production costs. Solution to last problem demonstrate the steps needed to calculate HHI Index and 4-firm concentration ratio.