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Production and Cost Shedules

Fill in the blanks in the following spreadsheet showing the short-run costs for a firm. Use the completed spreadsheet to answer multiple choice questions 1 through 5.

Fill in the blanks
Average Average Average
Q Total Total Fixed Total Fixed Variable Total Marginal
Cost Cost Variable Cost Cost Cost Cost
Cost
0 20 ____ _____ xx xx xx XX

1 ___ ____ _____ ____ ____ ____ 20

2 ___ ____ _____ ____ 15 ____ ____

3 ___ ____ _____ ____ ____ 12 1/3 ____

4 ___ ____ 76 ____ ____ ____ ____

1. What is total fixed cost?
A. 10
B. 15
C. 20
D. Cannot be determined
E. None of the above

2. What is total cost when Q = 1?
A. 30
B. 35
C. 40
D. 20
E. None of the above

3. What is average total cost when Q = 2?
A. 10
B. 20
C. 30
D. 40
E. None of the above

4. What is marginal cost when Q = 3?
A. 5
B. 10
C. 15
D. 20

5. What is marginal cost when Q = 4?
A. 5
B. 10
C. 11
D. 15
E. 26

The production engineers at Impact Industries have derived the optimal combinations of labor and capital (the only two inputs used by Impact) for three levels of output: 120, 180, and 240 units of output:
Q L* K*
120 4 20
180 6 30
240 8 50
Q is the output level, L* is the optimal amount of labor to use, and K* is the optimal amount of capital to use. The price of labor is $100 per unit and the price of capital is $20 per unit.

6. If the manager of Impact Industries decides to produce 120 units, what will the long-run total cost and long-run average cost of producing 120 units?

7. If the manager of Impact Industries decides to produce 180 units, what will the long-run total cost and long-run average cost of producing 180 units?

8. If the manager of Impact Industries decides to produce 240 units, what will the long-run total cost and long-run average cost of producing 240 units?

9. Are there economies of scale over the output range 120 to 180? Explain briefly.

10. Are there dis economies of scale over the output range 180 to 240? Explain briefly.

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Solution Preview

Please refer attached file for table.

1. What is total fixed cost?
    A. 10
    B. 15
    C. 20
    D. Cannot be determined
    E. None of the above

Answer C.20

2. What is total cost when Q = 1?
    A. 30
    B. 35
    C. 40
    D. 20
    E. None of the above

Answer C.40

3. What is average total cost when Q = 2?
    A. 10
    B. 20
    C. 30
    D. 40
    E. None of the above

Answer E. None of the ...

Solution Summary

Solution explains the methodology to find out the values of desired parameters.

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