HO_07_201_Sp03 - Cal Poly Pomona EC 201 Principles of...

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Cal Poly Pomona, EC 201 Principles of Microeconomics – Professor Brown Handout # 7 1) Consider the following table of data on costs. Units of Output Total Fixed Cost ($) Total Variable Cost ($) 1 500 180 2 500 340 3 500 420 4 500 560 5 500 740 Answer the following questions. a) What is Total Cost (TC) of producing 3 units of output? __________ b) What is Total Cost (TC) of producing 4 units of output? __________ c) What is the Marginal Cost (MC) of the 4 th unit (increasing output from 3 to 4 units)? __________ d) What is the Marginal Cost (MC) of the 5 th unit (increasing output from 4 to 5 units)? __________ e) What is the Average Total Cost (ATC) if 5 units are produced? __________
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Unformatted text preview: 2) a) Draw a diagram showing Average Total Cost (ATC) and Marginal Cost (MC) for production of a good where each unit costs $10 to produce, and Fixed Cost = 0 that requires no fixed cost. b) What is average variable cost AVC? c) What is the total cost (TC) when Q = 50? 3) Consider the ATC graph below for a typical firm in a perfectly competitive industry. a) Do firms earn economic profit if the market price = $100 per unit? b) How can we tell? c) What would happen to the number of firms in this market if P = 100? d) Suppose all firms are identical. What is the long run competitive equilibrium price”? ATC $/Q Q - output 100 50...
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