1)Is the cost data in the attached spreadsheet related to a long run or a short
ID: 1166443 • Letter: 1
Question
1)Is the cost data in the attached spreadsheet related to a long run or a short run cost analysis?
a)Trick question, those are the same thing Long run Short run It is impossible to tell
b) Long Run
c) Short run
d) It is impossible to tell
2) What is the total cost if the firm produces 0 units
3) At what level of production ( in terms of number of units of labor) is Average Variable Cost minimized?
4) What is the marginal cost if the firm hires 5 units of labor?
K L MP TP TFC TVC TC AFC AVC ATC MC 10 0 n/a n/a n/a 10 1 25 10 2 75 10 3 120 10 4 83 10 5 54 10 6 35 10 7 22 10 8 10 10 9 4 10 10 1 r 50.00 w 20.00Explanation / Answer
Here, capital (K) is a fixed factor and Labor (L) is a variable factor.
Per unit cost of capital = $50. So, total cost of 10 unit capital = 10 * $50 = $500. It is called fixed cost
Per unit cost of labor = $20
1) The cost data in the attached spreadsheet related to a short run cost analysis. Because a firm incurs fixed cost in the short run. In the long run all costs are variable.
2) If the firm produces 0 units, TC = $500.
3) AVC is minimized when the firm employes 4 units of labor and produces 303 output.
4) If the firm hires 5 units of labor, MC = $0.37
K L MP TP TFC($) TVC($)=$20*L TC($)=TFC+TVC AFC($)=TFC/TP AVC($)=TVC/TP ATC($)=TC/TP MC($)=?TC/?TP 10 0 500 0 500 n/a n/a n/a 10 1 25 25 500 20 520 20.00 0.80 20.80 0.80 10 2 75 100 500 40 540 5.00 0.40 5.40 0.27 10 3 120 220 500 60 560 2.27 0.27 2.55 0.17 10 4 83 303 500 80 580 1.65 0.26 1.91 0.24 10 5 54 357 500 100 600 1.40 0.28 1.68 0.37 10 6 35 392 500 120 620 1.28 0.31 1.58 0.57 10 7 22 414 500 140 640 1.21 0.34 1.55 0.91 10 8 10 424 500 160 660 1.18 0.38 1.56 2.00 10 9 4 428 500 180 680 1.17 0.42 1.59 5.00 10 10 1 429 500 200 700 1.17 0.47 1.63 20.00Related Questions
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