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Problems:

1. Below is hypothetical data for a manufacturer which possesses a fixed plant producing a commodity that requires only one variable input. Total Product is given. Total Fixed Cost is $220 per period. Units of the variable input cost $100 per unit of variable input.. Complete the following table.

Units of Var. Input

T.P.

A.P.

M.P.

1

100

100.00

-

2

250

125.00 150.00

3

410

136.67 160.00

4

560

140.00 150.00

5

700

140.00 140.00

6

830

138.33 130.00

7

945

135.00 115.00

8

1050

131.25 105.00

9

1146

127.33

96.00

10

1234

123.40

88.00

11

1314

119.45

80.00

12

1384

115.33

70.00

13

1444

111.08

60.00

14

1494

106.71

50.00

15

1534

102.27

40.00

16

1564

97.75

30.00

17

1584

93.18

20.00

T.F.C.

T.V.C.

T.C.

A.F.C.

A.V.C.

A.T.C.

M.C

18

1594

88.56

10.00

A. When MP is >, what is happening to: 1) MC 2) AVC B. When MC first begins to fall, does AVC begin to rise? C. What is the relation between MC and AVC when MP = AP? D. What is happening to AVC while AP is increasing? E. Where is AVC when AP is at its maximum? What happens to AVC after this point? F. What happens to MC after the point where it equals AVC? 1) How does it compare with AVC thereafter? 2) What is happening to MP thereafter? 3) How does MP compare with AP thereafter? G. What happens to TFC as output is increased? H. What happens to AFC as: 1) MP increases? 2) MC decreases? 3) MP decreases? 4) MC increases? 5) AVC increases? I.

How long does AFC decrease?

J. What happens to ATC as? 1) MP increases 2) MC decreases 3) AP increases 4) AVC decreases K. Does ATC increase? 1) As soon as the point of diminishing marginal returns is passed? 2) As soon as the point of diminishing average returns is passed?