Draw a graph and complete a short-run cost table by using the information provided.      (TP)   (TFC)     (AFC)    (TVC)    (AVC)      (ATC)      (TC)         (MC)       0        $          $          $         $             $            $             $       1                                           $12       2                    $12                 $10        3                                           $12       4                                           $14

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Asked Oct 17, 2019
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Draw a graph and complete a short-run cost table by using the information provided.

      (TP)   (TFC)     (AFC)    (TVC)    (AVC)      (ATC)      (TC)         (MC)

       0        $          $          $         $             $            $             $

       1                                           $12

       2                    $12                 $10 

       3                                           $12

       4                                           $14             

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Expert Answer

Step 1

In the short run, a firm will have two types of cost: fixed cost and variable cost.

Total fixed cost (TFC): The cost of all the fixed inputs in a production process is the total fixed cost. This cost does not change with the quantity of output produced.

Total variable cost (TVC): The cost of all the variable inputs in a production process is the total variable cost. For example, the cost of hiring labor and maintenance cost are variable costs. This cost changes with the quantity of output produced.

Step 2

Total cost of production for a firm is the sum of total fixed cost and total variable cost.

TC = TFC + TVC

The 6th column of table that is value of total cost is calculated by adding the values of total fixed cost and total variable cost.

Marginal cost: It is the additional cost of production when one more unit of quantity is produced.

MC = ΔTC/ΔQ

In the table, MC is calculated as:

If TC at q = 1 is 36

    TC at q = 2 is 44

Change in quantity ΔQ = 2-1 = 1

Change in total cost ΔTC = 44 – 36 = 8

Therefore, MC = ΔTC/ΔQ

                        = 8/1 = 8

With same method, the remaining values of marginal costs can be calculated.

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TFC ($) AFC (S) = TFC/ Q TVC (S) TC (S) ATC (S) Quantity AVC (S) -TVC/Q MC =ATC/AQ 0 24 24 1 24 24 12 12 36 36 12 2 24 12 20 10 44 22 8 3 24 8 36 12 60 20 16 4 24 6 56 14 80 20 20

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Step 3

Average variable cost (AVC): AVC is the variable cost per unit of output. It can be express as:

AVC = TVC/Q

For example, from the table when quantity is 4 and total variable cost TVC is 56 then AVC is:

AVC = TVC/Q = 56/4 = 14.

Average fixed cost (AFC): AFC is the fixed cost per unit of output. It can be express as:

AFC = TFC/Q...

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Cost of production

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