Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 12, Problem 6IP
To determine
Explain the cost concepts.
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Douglas Fur is a small manufacturer of fake-fur boots in Chicago. The following table shows the company’s total cost of production at various production quantities.
Fill in the remaining cells of the following table.
On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $200, so you should start your ATC curve by placing a green point at (1, 200). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $80, so you should start your MC curve by placing an orange square at (0.5, 80).)
Note: Plot your points in the order in which you would like them connected. Line segments…
In a furniture market, if a furniture company is analyzing the short run total costs, one of the following business practices would be beneficial. Which one?
divide the variable costs of production by the quantity of output
divide the total costs of production by the quantity of output
divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be.
divide total costs into two categories: variable costs that can't be changed in the short run and fixed costs that can be
The cost function of a UC Irvine donut shop is: C(q)=10+ 10q + q?, so the marginal cost
function is: MC= 10+ 2q. In these equations, q is the output in terms of boxes of donuts.
(a)
What is the firm's average cost curve? (Note: just write the equation, no graph necessary)
What is the firm's average variable cost curve? (Note: just write the equation, no graph
(b)
necessary)
(c)
If the price of a box of donuts is $20, what is the optimal output for this firm?
Chapter 12 Solutions
Microeconomics
Ch. 12.1 - Prob. 1QCh. 12.1 - Prob. 2QCh. 12.1 - Prob. 3QCh. 12.1 - Prob. 4QCh. 12.1 - Prob. 5QCh. 12.1 - Prob. 6QCh. 12.1 - Prob. 7QCh. 12.1 - Prob. 8QCh. 12.1 - Prob. 9QCh. 12.1 - Prob. 10Q
Ch. 12.A - Prob. 1QECh. 12.A - Prob. 2QECh. 12.A - Prob. 3QECh. 12.A - Prob. 4QECh. 12.A - Prob. 5QECh. 12.A - Prob. 6QECh. 12.A - Prob. 7QECh. 12 - Prob. 1QECh. 12 - Prob. 2QECh. 12 - Prob. 3QECh. 12 - Prob. 4QECh. 12 - Prob. 5QECh. 12 - Prob. 6QECh. 12 - Prob. 7QECh. 12 - Prob. 8QECh. 12 - Prob. 9QECh. 12 - Prob. 10QECh. 12 - Prob. 11QECh. 12 - Prob. 12QECh. 12 - Prob. 13QECh. 12 - Prob. 14QECh. 12 - Prob. 15QECh. 12 - Prob. 16QECh. 12 - Prob. 17QECh. 12 - Prob. 1QAPCh. 12 - Prob. 2QAPCh. 12 - Prob. 3QAPCh. 12 - Prob. 4QAPCh. 12 - Prob. 5QAPCh. 12 - Prob. 1IPCh. 12 - Prob. 2IPCh. 12 - Prob. 3IPCh. 12 - Prob. 4IPCh. 12 - Prob. 5IPCh. 12 - Prob. 6IP
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- Economist T. Yntema estimated the short-run total cost function of the United States Steel Corporation in the 1930s to be as follows: C=182.1+55.73Q where C is total annual cost (in millions of dollars) and Q is millions of tons of steel produced. a. b. C. d. What was U.S. Steel's fixed costs? If U.S. Steel produced 10 million tons of steel, what was its average variable costs? What was U.S. Steel's marginal costs? If there were diminishing marginal returns to the variable inputs in the production of steel, do you think that this equation provided a faithful representation of U.S. Steel's short-run total cost function? Briefly explain.arrow_forwardGraphically show the relationship between the total fixed cost, the total variable cost, and the total cost. Draw a total cost curve and total revenue curve so that at some outputs that the firm takes losses, outputs where the firm makes unnecessary profits, and where the firm makes only necessary profits. Then, pick a point where the firm is taking losses and show on the graph, the firm’s total losses. Do the same for a point (an output level) where the firm may be making unnecessary profits.arrow_forwardA watch manufacturer finds that at 1,000 units of output, its marginal costs are below average total costs. If it produces an additional watch, will its average total costs rise, fall, or stay the same?arrow_forward
- The table below shows the weekly cost of producing cowboy hats. Complete the table by filling in the missing values. Instructions: Round your answers to 1 decimal place. Cowboy Hat Production Costs Total Fixed Cost Total Variable Cost output (dollars) (dollars) 0 $1,000 10 20 30 50 $0 500 860 1,400 Total Cost (dollars) $1,000 1,660 2,100 Average Fixed Cost (dollars) 3-1 $ 33.3 Average Variable Cost (dollars) TEAM $ 33 28.7 28 Average Total Cost (dollars) $150 83 52.5arrow_forwardUse the cost table below to find the following marginal costs. Output quantity Total variable cost Total fixed cost Total cost 20 80 60 140 40 140 60 200 60 210 60 270 80 300 60 360 100 420 60 480 120 600 60 660 140 840 60 900 What is the marginal cost when output is 60? $ What is the marginal cost when output is 100? $ What is the marginal cost when output is 140? $arrow_forwardConsider Firm GM, a car manufacturer. Suppose you have some information regarding the cost curves of Firm GM: Output Average Cost ( at that output level) Marginal Cost of that Car 9,999 ? $ 12,000 10,000 $ 14,000 $ 11,500 19,999 $ 12,500 20,000 ? $ 12,600 Will the Average Cost of 9,999 cars be greater than $ 14,000 , less than $ 14,000, or can you not tell with the information given? ( Hint: it might help to draw a graph of AC and MC, and see if you can place units 9,999 and 10,000 on that graph). O Greater than $ 14,000 O Less Than $ 14,000 O Can't Tell with the information givenarrow_forward
- A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is $1,000. What does the average fixed cost curve look like? Use your response to explain what “spreading the overhead” means.arrow_forwardImagine that you are asked to consult with a drama club that puts on a play every year. The club asks you: How much should we charge for tickets if we want to cover our costs? You begin by listing the club’s fixed and variable costs and then make a recommendation for a ticket price. Give the club three examples of each type of cost. Fixed Costs [example 1] [example 2] [example 3] Variable Costs [example 1] [example 2] [example 3] What is your recommendation for ticket pricing? Do you cover just fixed costs or both costs? Schiller, B. R., & Gebhardt, K. (2016). The economy today (14th ed.). Columbus, OH: McGraw-Hill Higher Education.arrow_forwardImagine that you are asked to consult with a drama club that puts on a play every year. The club asks you: How much should we charge for tickets if we want to cover our costs? You begin by listing the club’s fixed and variable costs and then make a recommendation for a ticket price. Give the club three examples of each type of cost. Fixed Costs [example 1] [example 2] [example 3] Variable Costs [example 1] [example 2] [example 3] What is your recommendation for ticket pricing? Do you cover just fixed costs or both costs?arrow_forward
- The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. Output TVC 1 $30 50 65 85 110 2 3 4 5 The total cost of producing 3 units of output isarrow_forwardA firm has a fixed production cost of $4000. For the first 100 units of production, the firm has a marginal cost of $50 per unit produced. Producing more than 100 units has a marginal cost of $70 per unit produced. The firm cannot produce more than 150 units. How much does it cost to produce at q=0? at q=50? at q=100? at q=125? at q=150? Graph the firm’s marginal cost functionarrow_forwardUse the cost table below to find the following marginal costs. Output quantity Total variable Total fixed Total cost cost cost 20 80 60 140 40 140 60 200 60 210 60 270 80 300 60 360 100 420 60 480 120 600 60 660 140 840 60 900 What is the marginal cost when output is 20? $ What is the marginal cost when output is 80? $ What is the marginal cost when output is 120? $ |arrow_forward
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