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Production Exercise

Please see attached file.

Find TC, AFC, AVC, ATC, and MC for the following table. Also, graph the TC curve on one graph and graph AFC, AVC, ATC and MC on another graph.

UNITS FC VC TC MC AFC AVC ATC
0 50 0
1 50 90
2 50 120
3 50 165
4 50 220
5 50 290

1. What does the marginal cost curve measure?
2. What does the average variable cost curve measure?
3. What does the average fixed cost curve measure?
4. What does the average total cost curve measure?
5. How does the law of diminishing marginal productivity affect the shape of short-run cost curves?
6. Where does the marginal cost curve intersect the average total cost and average variable cost curves?

You are presented with the following table on average productivity. Labor is your only variable cost. The price of labor is $20.00 per hour, and the fixed cost is $50.00. Fill in the table below for marginal product (MP), average product (AP), total cost (TC), marginal cost (MC), and average variable costs (AVC).

LABOR TP MP AP TC MC AVC
1 2
2 6
3 15
4 20
5 23
6 24

1. Graph the average variable cost curve and show it is an approximate mirror image of the average productivity curve.
2. Graph the marginal cost and marginal productivity curves. Show that they are approximate mirror images of each other.
3. What is the relationship between marginal cost (MC) and average cost (AVC and ATC)? What is the relationship between marginal product (MP) and average product (AP)?

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