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Assignment 3.2

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Assignment 3.2

Uploaded by

vimalraj
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF SOUTHERN CALIFORNIA

Marshall School of Business


ECON 351x: Microeconomics for Business

Prof. Safarzadeh Student Name:


_________________
Assignment #3.2 Student ID:
_________________

I. Answer questions 1- 6 using the following information: The


following data shows the relationship between quantity
produced and the total cost of producing special gadget in a
manufacturing business.

Quantity Total Cost


0 20
1 30
2 38
3 44
4 48
5 56
6 75
7 100

1- What is the fixed cost of the business?


a- $6 c- $20
b- $70 d- $28

2- What is the marginal cost of the third unit of output?


a- $6 c- $20
b- $70 d- $28
3- What is the variable cost of four units of output?
a- $6 c- $20
b- $70 d- $28

4- What is the average variable cost of four units of output?


a- $6 c- $20
b- $7 d- $28

5- The diminishing return phase of the production function starts


from the
a- 3 unit of output
rd
c- 5 unit of output
th

b- 4th unit of output d- 6 unit of output


th

e- none of the above

6- The average total cost of 5 units of output is


a- $6 c- $55
b- $75 d- $15

7- As output increases, the average fixed cost of producing the


good _____
a- increases c- stays the sane
b- decreases d- is minimized
e- none of the above

8- As output increases, the fixed cost __________


a- increases c- stays the sane
b- decreases d- is minimized
e- none of the above

9- As output increases, the total cost of production


a- increases c- stays the sane
b- decreases d- is minimized
e- none of the above
10- As output increases, the variable cost of production
a- increases c- stays the sane
b- decreases d- is minimized
e- none of the above

11- As output increases, average variable cost of production


a- increases then decreases with a “n” shape c- stays the
sane
b- decreases then increases with a “U” shape d- is
minimized
e- none of the above

12- As output increases, the marginal cost production


a- increases then decreases with a “n” shape c- stays the
same
b- decreases then increases with a “U” shape d- is
minimized
e- none of the above.

13- A manufacturer is producing 150 units of output a day by


hiring 80 units of labor and 95 units of capital. The
manufacturer observes that a one-unit of new hiring in labor
increases output to 156 and a one-unit addition to capital
increases output to 162. Market prices of labor and capital are
$10 and $15, respectively.
a- the firm should hire more labor c- the firm should use
more capital
b- the firm should not change labor/capital combination.
d- the firm should raise the price.

II. A manufacturer’s total cost data is given as:


Q TC FC VC ATC AFC AVC MC

0 100
1 170

2 222

3 270

4 310

5 345

6 375

7 425

8 490

9 570

10 675

1- Fill in the Fixed Cost (FC), Variable Cost (VC), Average


Total Cost (ATC), Average Fixed Cost (AFC), Average Variable
Cost (AVC), and Marginal Cost (MC) columns.
2- Graph FC, TC, and VC functions on the quantity-cost
coordinate system. Comment on the response of each cost to
increase in quantity. (You may use Excel for graphing)
3- Graph ATC, AVC, and MC on the quantity-cost coordinate
system. Comment on the response of each cost to increase in
quantity.
4- Find quantities of outputs that correspond to minimum AVC
and minimum ATC curves.
Show that MC function always passes through minimum points
of AVC and ATC curve. Explain why.

III. The relationship between output (Q) and total cost of


production (TC) for a manufacturer is estimated to be
TC = 1000 + 45Q - 3.6Q + .1Q . Answer the following question:
2 3

1. What is the fixed cost of the business?


2. Write the equation of the average fixed cost of the business,
AFC.
3. Grah FC and AFC for the range of Q from 1 to 20.
4. Write the equations of VC and AVC.
5. Graph VC and AVC for the range of Q from 1to 40.
6. Write the equations of MC.
7. Graph MC for the range of Q from 1to 40.

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