Short-Run Costs Of A Production Schedule
A. Short-Run Costs of A Production Schedule.
Calculate Table
OUTPUT
TFC
TVC
TC
MC
AFC
AVC
ATC
0
200
0
1
200
175
2
200
300
3
200
500
4
200
800
5
200
1,200
6
200
1,700
7
200
2,300
Determine the following:
1. What is the behavior of the TC as Output increases? Answer the same
question in regard to the TFC. Why the difference?
2. What do the AFC, AVC and ATC curves do as regards increases in output? Is
there a difference in the AFC? Why?
3. What does the MC curve do with regard to Output? Why? What is the
relationship between the MC curve and ATC, AVC curves? Would this
be important information for the Producer?
B. Short-Run Cost of Production Schedule – Product X
(Perfect Competition)
OUTPUT
TFC
TVC
TC
MC
AVC
ATC
0
200
0
1
200
175
2
200
300
3
200
500
4
200
800
5
200
1,200
6
200
1,700
7
200
2,300
(A) Assume price = $250; calculate total profit/loss using TR – TC method.
OUTPUT
TR
TC
PROFIT/LOSS
0
1
2
3
4
5
6
7
(B) Calculate Output using the formula: Profit = (Price – ATC) x Q
Hint: construct a new table to find new output at the different levels of ATC values (in first table) and profit in table 2 when price is $250.
(C) Calculate Output using the formula: Profit = (Price – ATC) x Q
Hint: construct a new table to find new output at the different levels of ATC values (in first table) when price is $180. Also find new profit/loss values first.
(D) Calculate Output using the formula: Profit = (Price – ATC) x Q
Hint: construct a new table to find new output at the different levels of ATC values (in first table) when price is $140. Also find new profit/loss values first.
(E) Use price schedule to determine Q‘s. (Repeat the process for prices $350, $450,, $550, and $650 before presenting all the output computed at different price levels in the table below.
(F) What does short-run cost model tell you about the behavior of the firm in regard
to MC and Price?
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