# Qrb 501 Week 1 Assessment Questions

1374 Words Aug 19th, 2010 6 Pages
Week 1 Assesment Questions

Tamara Powell

March 8, 2010

QRB 501

Prof. David Ferguson

Complete the following order of operations questions:

Chapter 7

12. Key Question The following table shows nominal GDP and an appropriate price index for a group of selected years.
Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data
527.4/22.19 = 23.767
911.5/26.29 = 34.67
2295.9/48.22 = 47.61
4742.5/80.22 = 59.12
8790.2/103.22 = 85.16
|Year |Nominal GDP, |Price Index |Real GDP, |
| |Billions |(1996 = 100)
a. Graph total fixed cost, total variable cost, and total cost.
Explain how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves.
[pic]

b. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relationships to one another. Specifically, explain in non-technical terms why the MC curve intersects both the AVC and the ATC curves at their minimum points.
[pic]
Marginal cost is the constant.
c. Explain how the location of each curve graphed in question 7b would be altered if (1) total fixed cost had been \$100 rather than \$60 and (2) total variable cost had been \$10 less at each level of output.

|Total |Total |Total Variable |Total |Average |Average |Average |Marginal |
|Product |Fixed |Cost |Cost |Fixed |Variable |Total |Cost |
| |Cost | | |Cost |Cost |Cost | |
|0 |\$ 60 |\$ 0 |\$ 60 |\$ 0 |\$ 0 |\$ 0 |\$ 0 |
|1 |\$ 60 |\$ 45 |\$ 105 |\$ 60 |\$ 45 |\$ 105 |\$ 45 |
|2 |\$ 60