Total Cost Curves
a. Given the following chart and information fill in the missing values. Please write on a separate sheet.
Output TFC TVC TC MC AFC AVC ATC
0 $2,000 --
50 100
100 80
150 60
200 50
250 60
300 85
350 125
b. Please graph your results. Draw both the average and total cases making sure to explain these important relationships or trends in the curves:
In the AVG Cost Curves:
i) Shape of AVC as Q increase
ii) AVC and ATC and Q increases
iii) U-shape of AVC and ATC
In Total Cost Curves
i) Shape of TFC, TVC/TC
ii) TC and TVC as Q increases (note: TC = TVC + TFC ? this tells you something about distance between the two curves)
c. In a typical LRAC curve like the illustration below, explain economies and diseconomies of scales as well as constant returns to scale. Make sure to use the graph and explain the concept.