ECONOMICS+Problem+Set+ (1).docx - 1) Based on your...

1) Based on your knowledge of the definition of the various measures of short-run cost,
complete this table.
Q TC TFC TVC AC AFC AVC MC
0 120 [A] [B] - - - -
1 [C] [D] [E] 265 [F] [G] [H]
2) Consider the following cost equation: Total Cost (TC) = 160Q -10Q 2 + 1.2Q 3 . What
is Total Cost when the Quantity is 20?
3) Which of the following represents the equation for the Average Cost (AC)?
4) What is the Marginal Cost of producing the 21
st
unit? (Hint: Begin by calculating
TC at 20 and at 21.) Round your answer to the nearest whole number.

5) Questions 5 through 7 refer to the following graphical representation of a short-run
situation faced by a perfectly competitive firm.
Is this a good market for this firm to be in?
Yes the firm should be here in the short run but in the long run it should leave.
Yes the firm should be here in the short run and it should also stay in the long run.
No; the firm should exit immediately.
Answer
Yes the firm should be here in the short run but in the long run it should leave.
6) Refer to question 5. Which of the following describes the firm’s situation in the short
run?
7) Refer to question 5. What do you expect to happen in the long run?