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HW5(2)

# HW5(2) - Homework 5 Question 1 Costs and Perfect...

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Homework 5 Question 1: Costs and Perfect Competition Consider the short run costs of a detergent manufacturing form. A. Define the following terms: 1. Fixed Cost. 2. Total variable Cost. 3. Total Cost. 4. Average Total Cost. 5. Average variable Cost. 6. Marginal Cost. B. Fill in the Following Table: Quantity FC TVC TC MC ATC AVC 0 - - - 1 8 2 14 3 36 4 9.5 5 4 4.8 6 8 7 8 10 6 C. Plot and label the curves AVC, ATC and MC. Add a curve of AFC. D. If your diagram is correct, ATC declines at first and then rises. 1. What reasons are there for believing that this is the usual form of the ATC curve? 2. When the ATC is decreasing the MC is (less than/greater than) ATC. Choose the correct statement. 3. When the ATC is increasing the MC is (less than/greater than) ATC. Choose the correct statement. 4. True or False: When ATC is decreasing MC must also be decreasing. 5. ATC? E. Assume that the firm is operating in a Perfectly Competitive market and the market

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HW5(2) - Homework 5 Question 1 Costs and Perfect...

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