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Using Excel to predict output decisions: Definitive example

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A firm's cost curves are given in the following table.

q TC TFC
0 100 100
1 130 100
2 150 100
3 160 100
4 172 100
5 185 100
6 210 100
7 240 100
8 280 100
9 330 100
10 390 100

a. Use Microsoft Excel to calculate the firm's Total Variable Cost (TVC), Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC).

b. Suppose market price is $30. How much will the firm produce in the short run? How much are total profits?

c. Suppose market price is $50. How much will the firm produce in the short run? What are total profits?

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Solution Summary

This solution shows how to use Microsoft Excel to easily calculate a firm's cost, revenue and profit curves. It is then very easy to predict a firm's short-run and long-run output decisions simply by looking at the spreadsheet.

Solution Preview

a. See the attached Excel file. The formulas in the cells show how to calculate each variable.
b. ...

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