SOLUTIONS & DISCUSSION
PROBLEMS & EXERCISES
UNIT TWO (FOR EXAM TWO)
Unit Two: Assignment 1: Web Problem U2-A1-P1
A business firm has leased plant and equipment to produce scientific calculators. They can be sold in this market at $26 each for any of the quantities shown below.
|
Q |
FC |
VC |
TC |
MC |
ATC |
AVC |
TR |
MR |
|
0 |
$ |
$ |
50 |
----- |
$ |
$ |
$ |
----- |
|
1 |
50 |
$ |
55 |
$ |
$ |
$ |
26 |
$ |
|
2 |
$ |
12 |
62 |
$ |
$ |
6.00 |
$ |
$ |
|
3 |
$ |
$ |
75 |
$ |
25 |
$ |
$ |
$ |
|
4 |
$ |
$ |
96 |
21 |
$ |
$ |
$ |
$ |
|
5 |
$ |
$ |
125 |
$ |
25 |
$ |
$ |
$ |
|
6 |
$ |
112 |
162 |
$ |
$ |
18.67 |
$ |
$ |
|
7 |
50 |
$ |
203 |
$ |
$ |
$ |
182 |
$ |
|
8 |
$ |
$ |
248 |
$ |
$ |
$ |
$ |
26 |
Now fill in the boxes with the dollar signs before you read any further. Remember, our special effort-detect program can tell if you're peeking before working out the answers. It will freeze your computer!
How much are FC? At Q = O, all costs are fixed, so FC = 50.
FC + VC = TC, so go ahead and fill in the VC column.
For MC, leave the first row blank and remember that MC is the change in TC divided by the change in Q.
Fill in AVC and ATC using the definitions from the previous practice problem.
TR = P x Q ; Price has been defined as $26.
MR = change in TR divided by the change in Q. Since the firm does not have to lower its price to sell more, this will be a constant and will equal the price.(In other production functions involving monopoly and oligopoly, firms do have to lower the price in order to sell more. We will study those cases later.)
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