1. Which of the following statements are correct? (i) When average variable cost is rising, marginal cost must be greater than average variable cost. (ii) When marginal cost is rising, average total cost must be rising. (iii) When marginal cost is rising, average fixed cost could be rising or falling. (iv) A competitive firm will produce at the minimum effect scale in the long-run equilibrium. (A) (i), (ii) (B) (i), (iii) (C) (i),(iv) (D) (i), (iii), (iv)
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- (a) Calculate this firm’s marginal cost for output level 5. (b) Calculate this firm’s marginal cost for output level 6. (c) What is the average total cost at which, this firm reaches its break even-point? (d) What is the average variable cost at which, this firm reaches its shut-down point?11. A graph shows quantity of output produced on the horizontal axis and shows total variable cost and total cost on the vertical axis. Which of the following is true about the vertical distance between total variable cost and total cost as output increases? (A) It decreases. (B) It remains constant. (C) It increases. (D) It decreases and then increases. (E) It increases and then decreases.1. A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costs of MC = 5 + 14g, and average variable costs of AVC = 5 + 7q. (a) What are the firm's variable costs (VC)? (b) What is the firm's total cost function? (c) If the price is $75, how much does the firm supply? (d) Does the firm continue to supply this quantity in the short-run? (e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium.
- 1. Suppose a firm’s cost function is given by C(q) = 20 + 10q − 4q^2 + q^3(a) What is fixed cost?(b) What is variable cost?(c) Compute average cost, average fixed cost, and average variable cost, assuming q > 0.(d) Derive marginal cost.(e) Solve for the shut-down level of production, qSD. (Hint: The minimum of a well-behavedcurve can be found by setting the first derivative equal to zero.)A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costs of MC = 5 + 14q, and average variable costs of AVC = 5 + 7q. (a) What are the firm’s variable costs (VC)? (b) What is the firm’s total cost function? (c) If the price is $75, how much does the firm supply? (d) Does the firm continue to supply this quantity in the short-run? (e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium.1. Mariel runs an ice cream shop. Her short-run cost is given by 300 + is the number of ice cream cones she sells per day. + 3q where q 3000 (a) Find mathematical expressions for Mariel's marginal cost, average variable cost, and average total cost. (b) Sketch' Mariel's marginal cost, average variable cost, and average total cost. (c) Suppose the market price for ice cream cones is $3. How many ice cream cones will Mariel supply? What will her profits be? Identify your answers on the diagram and then compute the values mathematically. (d) Find the minimum market price such that Mariel will stay in business in the short-run, both on your diagram and mathematically. (e) Assume that Mariel can only run an ice cream shop of this size and in the long run must decide whether to operate or not. (In other words, assume that Mariel's LRAC curve is her short-run average total cost curve.) Identify the minimum market price such that Mariel will stay in business in the long-run on your diagram.…
- Cost LRAC 40 30 20 10 100 200 400 800 Output b. What happened to the cost of one good as the firm increased its output from 100 units to 200 units and from 200 units to 400 units? c. What is the firm experiencing as it increased it scale of operation from 100 units to 400 units? d. What is the firm experiencing if it chooses to produce at point P? Give reason for your answer. e. Which point would be the best point for the firm to produce at? Give reason for your answer.QUESTION 2 (a) Use the concepts of economies and diseconomies of scale to explain the shape of a firm’s long-run ATC curve. What is the concept of minimum efficient scale? What bearing can the shape of the long-run ATC curve have on the structure of an industry? (b) If a firm in monopoly maximizes revenue, does it automatically maximize profit too? Explain the content with relevant example and diagrams.6. A firm manufactures and markets a product that sells for Birr 20 per unit. Fixed costs associated with activity total Birr 40,000 a month, while variable cost per unit is Birr 10. A maximum of 10,000 units can be produced and sold. Required: a) Drive the TR, TC and Total profit functions. b) Sketch the TR, TC and Total profit functions in the same coordinate system. c) What is the Break-even point (in terms of quantity and sales volume)? d) Drives the new TC, Total profit functions given that FC is increased by Birr 10,000 a month, and calculate the new break-even point. e) Drive the new TC and Total profit functions given that unit variable costs is decreased by 20% and calculate the new Break-even point. f) Drive the new TR and Total profits functions given that the unit selling price increases by 20% and calculate the new break-even point. g) What is the relationship that you may inter from BEP& FC, P& BEP and V& BEP? h) Assume selling prince increases by 10%…
- Figure 1 shows price, marginal cast and axecage. cost cuoces for a fio. Figure 1 Costs MC AC (RM) AVC 22 10 80 100 Output (Q) How much is total fixed cost (TFC)? 9. b. Calculate total variable cost (TVC) if output is 100 units. Compute total cost (TC) of producing 100 units of output. C. d. Calculate the average fixed cost (AFC) of producing 500 units of output. e. If the price of that product is RM25 per unit, calculate the total revenue if the firm sells 100 units of output for RM25 each. ...... .......PROBLEM 2. Answer the questions below on the basis of the diagram. $10 MC ATC 9 AVC 7 3 2 1 1 2 3 4 6. 7 8 9 10 Quantity (in 1,000s) (a) How can you tell if these cost curves are for the short run or the long run? (b) What does the graph indicate about: (1) AVC at 6000 units of output? (2) ATC at 6000 units of output? (3) AFC at 6000 units of output? (4) TVC at 6000 units of output? (5) TFC at all levels of output? (6) TC at 10,000 units of output? (7) When diminishing returns set in? Cost per unitPlease