04 Jun Question Module 3 – Case COSTS OF PRODUCTION
Question
Module 3 – Case
COSTS OF PRODUCTION
Case Assignment
The following table gives short-run and long-run total costs for various levels of output for a perfectly competitive firm:
Output (Q) SRTC AVC TR
0 350
1 400
2 425
3 465
4 505
5 560
6 635
7 730
Note: AVC is Average Variable Cost
TR is Total Revenue
SRTC is Short Run Total Cost
SRTC = FC + VC (Total Cost = Fixed Cost + Variable Costs)
Please see background material for additional formulas.
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.
Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Format: double-spaced and typed.
The following items will be assessed in particular:
Show all work for numerical problems.
Your ability to understand costs and how firms make decisions.
Some in-text references to the modular background material.
The assignment should address each element of the assignment. Remember to support your answers with solid references including the Case readings.
Upload your assignment to the Case 3 dropbox when it is completed.
Module 3 – SLP
COSTS OF PRODUCTION
Profits and Your Franchise Firm
In this module, we have explored the costs of production which have a direct impact on the profit of your firm. Write a 2- to 3-page essay that addresses the following questions.
Give an example of indivisible inputs for your firm.
Discuss the characteristics of a perfectly competitive firm. Does your franchise firm share any of these same traits? Explain.
In the long run, what happens to economic profits (assuming your firm is competitive)? Explain.
SLP Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Please be sure to cite all sources within the text and a reference list at the end of the paper.
Length: 2–3 pages double-spaced and typed.
The following items will be assessed in particular:
Your ability to examine inputs of a particular firm.
Your ability to understand a perfectly competitive firm.
Some in-text references to the modular background readings (APA formatting not required).
The essay should address each element of the assignment. Remember to support your answers with solid references.
Upload your assignment to the SLP 3 dropbox when it is completed.
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