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3. Explain the relationship between firm's short- run production function and its short-run cost function. Focus on the marginal product of an input and the marginal cost of production.

1. Base on your knowledge of the definition of the various measures of the short-run cost, complete this table.

Q TC TFC TVC AC AFC AVC MC

0 120 X X X X
1 265
2 264
3 161
4 85
5 525
6 120
7 97
8 768
9 97
10 127

6. Indicate the effect that each of the following conditions will have on a firms's variable cost curve and its average cost curve.
a. The movement of brokerage firm's administrative offices from New York City to New Jersey, where the average rental cost is lower.
b. The use of two shifts instead of three shifts in a manufacturing facility.
c. An agreement reached with the labor union in which wage increases are tried to productivity increases.
d. The elimination of sugar quotas ( as it pertains to those firms that use a lot of sugar, such as bakeries and soft drink bottlers).
e. Imposition of stricter environmental protection laws.

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