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Economics

Cost of Production

Output (Q)	SRTC	AVC	TR
0	350
1	400
2	425
3	465
4	505
5	560
6	635
7	730

AVC is Average Variable Cost

TR is Total Revenue

SRTC is Short Run Total Cost

SRTC = FC + VC (Total Cost = Fixed Cost + Variable Costs)

Suppose the fixed cost (FC) of production is $350 and Price (P) is $55, complete the table above. (Cut and paste the table into a separate document).

- Suppose you are producing 2 units of output (Q = 2), if you want to produce one extra unit of output (Q = 3), what would be the marginal cost? (Show your work.)

- If the market price is given as $55, how much output will the perfectly competitive firm produce to maximize profits? (Show your work.)

- Calculate the profit or loss. (Show your work.)

- Should the firm always shut down in the short run when it experiences a loss? Explain.

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Microeconomics, Economics

Category:- Microeconomics
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