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ECO302 Chp 7 HW Solutions

# ECO302 Chp 7 HW Solutions - Chapter 7 1 Suppose a fi rm has...

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Chapter 7 1. Suppose a firm has a cost function: = + + C 5 2q2 q3 . Draw a table like Table 7.1 for q between 0 and 4. Draw graphs similar to figure 7.1, with one graph for FC, VC, and C and another for MC, AFC, AVC, and AC. Q FC VC C MC AFC AVC AC 0 5 0 5 -- -- -- -- 1 5 3 8 7 5 3 8 2 5 16 21 20 2.5 8 10.5 3 5 45 50 39 1.67 15 16.67 4 5 96 101 64 1.25 24 25.25 Q is the quantity of output given in the problem. FC are the fixed costs that remain constant in the cost equation. VC are the variable costs that change with the level of output. C is total cost calculated by adding FC and VC . MC is marginal cost calculated by taking the derivative of the cost function (d C /d Q ). AFC are the averaged fixed cost calculated by dividing FC by Q . AVC are the averaged variable costs calculated by dividing VC by Q . AC are the average total costs calculated by adding AFC and AVC .

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Chapter 7
Chapter 7 2. Suppose a firm uses only capital and labor in producing its output. Its production function is given by = q 2KL2 .

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ECO302 Chp 7 HW Solutions - Chapter 7 1 Suppose a fi rm has...

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