Economics 172
Homework 8 Chapter 8 Due Friday April 8
Review Questions
1, 5, 11, 14, 19, 21
8.1.
Q |
TFC |
TVC |
TC |
MC |
AFC |
AVC |
ATC |
|
|
|
=(TFC+TVC) |
|
=FC/Q |
=TVC/Q |
=TC/Q or (AFC+AVC) |
1 |
$100.00 |
$50.00 |
$150.00 |
$50.00 |
$100.00 |
$50.00 |
$150.00 |
2 |
$100.00 |
$80.00 |
$180.00 |
$30.00 |
$50.00 |
$40.00 |
$90.00 |
3 |
$100.00 |
$120.00 |
$220.00 |
$40.00 |
$33.33 |
$40.00 |
$73.33 |
4 |
$100.00 |
$170.00 |
$270.00 |
$50.00 |
$25.00 |
$42.50 |
$67.50 |
5 |
$100.00 |
$250.00 |
$350.00 |
$80.00 |
$20.00 |
$50.00 |
$70.00 |
8.5. Yes, if the LR
marginal cost curve is U shaped, then it must follow that if MC is below LAC,
the LAC is falling. If MC is above LAC,
then LAC is rising. Therefore, LAC must
be U shaped.
8.11.
The key point here
is that when the LAC reaches its minimum, LAC = LMC and then LMC and LAC are
the same line.
8.14. An alternative
explanation is that decreasing returns to scale set in at a much lower share of
the market in textiles than in automobile manufacturing. That is, a big car manufacturing company
can produce at lower per unit costs than a smaller company, so car companies
need to be large to be efficient. In
textiles, that is not true. So the
minimum efficient scale in textiles is smaller (as a percent of the total
market size) than in autos.
8.19. TC = a + bq + cq2
TFC = a
TVC = bq + cq2
MC
= dC/dQ = b + 2cq
AFC = FC/q = a/q
AVC = TVC/q = b + cq
ATC = TC/q = a/q + b + 2cq
8.21.
I.a Under a new government law, each television produced must now contain a V-chip that permits parents to block reception of certain programs. The V-chip raises firms’ production costs by $50 per television set. Will the new law affect a television manufacturer’s short run average cost curve? Will it affect the short run marginal cost curve? Explain.
The V-chip adds to
the cost of production, so it definitely increases the marginal cost of
producing one more television. It will
also increase the average cost of producing each TV by $50.
b. Under a new government law, each television manufacturer must contribute $10,000 per year to help fund a commission that established technological ofrmats and standards for the television industry. Will the new law affect a television manufacturer’s short run average cost curve? Will it affect the short run marginal cost curve? Explain.
This new law
increases the fixed costs of producing TVs.
It has no impact on the cost of producing one more TV, so there is no
change in the short run marginal cost curve or the average variable cost of
producing TV’s in the short run. It does
increase the average total cost of producing TVs.