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    Studying average and total cost curves

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    Problem:

    a.Given the following chart and information fill in the missing values.

    Output TFC TVC TC MC AFC AVC ATC
    0 $2,000 --
    50 100
    100 80
    150 60
    200 50
    250 60
    300 85
    350 125

    b. Please graph your results. Draw both the average and total cases making sure to explain these important relationships or trends in the curves:

    In the AVG Cost Curves:
    i) Shape of AVC as Q increase
    ii) AVC and ATC and Q increases
    iii) U-shape of AVC and ATC

    In Total Cost Curves
    i) Shape of TFC, TVC/TC
    ii) TC and TVC as Q increases (note: TC = TVC + TFC  this tells you something about distance between the two curves)

    c. In a typical LRAC curve like the illustration below, explain economies and diseconomies of scales as well as constant returns to scale. Make sure to use the graph and explain the concept.

    © BrainMass Inc. brainmass.com May 20, 2020, 5:33 pm ad1c9bdddf
    https://brainmass.com/economics/price-levels/studying-average-and-total-cost-curves-230344

    Attachments

    Solution Preview

    Please refer attached file for complete solution and better clarity of formulas and tables. Graphs are missing here.
    Solution:
    a. Given the following chart and information fill in the missing values.

    Output TFC TVC TC MC AFC AVC ATC
    0 $2,000 $0 $2,000
    50 $2,000 $3,000 5000 60 $40 $60 100
    100 $2,000 $6,000 8000 60 $20 $60 80
    150 $2,000 $7,000 9000 20 $13 $47 60
    200 $2,000 $8,000 10000 20 $10 $40 50
    250 $2,000 $13,000 15000 100 $8 $52 60
    300 $2,000 $23,500 25500 210 $7 $78 85
    350 $2,000 $41,750 43750 365 $6 $119 125

    1) TFC - It will remain $2000 for all production ...

    Solution Summary

    Solution explains the formulas for calculating TFC, TVC, TC, MC, AFC, AVC and ATC. It also explains the shape and behavior of average and total cost curves. Economies/diseconomies/constant economies are also explained for long run average cost curve (LRAC).

    $2.19

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