Practice Questions #8

1) If the total cost function is TC=20+3Q, then:

a. marginal cost = 3

b. average variable cost = 3Q

c. average fixed cost = 3

d. average total costs = 20/Q

e. none of the above

2) If total costs equal TC=20+3Q, what is average total cost, average variable cost, and average fixed cost?

3) Let FC, VC, MC and TC denote fixed cost, variable cost, marginal cost and total cost respectively. Suppose John has a bakery. If the annual rent he pays increases, then:

a. FC increases; VC increases; MC and TC remain the same

b. FC increases; VC, MC and TC remain the same

c. FC increases; TC increases; MC and VC remain the same

d. FC increases; VC, MC and TC increase Price (dollars per pizza)

e. none of the above

4) A company could sell 99 units of a good at a total revenue of $434 or sell 100 units of the same good at a total revenue of $450. The marginal revenue of the 100th unit

a. is $1.60.

b. is $450.

c. is $16.

d. is $34.

e. is $24.

5) Factory A has cost curve TCa=50+4*Q, while factory B has cost curve TCb=4+50*Q. Answer the following questions:

a.  You are told the factories both had the same total cost in this period.  What was output in factory A?  In factory B?

b.  What are fixed costs for factory A?  For factory B?

c.  What is the difference in marginal cost between these two factories?

d.  Suppose you wanted only .5 units (Q=.5), but would have to choose which factory you wanted to use.  You want to pay as little as possible but must pay the cost of production.  Where do you produce?

e. Repeat part (d) but assume you want 2 units.

f. What is a rule for production then, if you can choose where to produce? (ie produce in factory A if _____, factory B if ______)