# Costs and Total Variable Cost

9/15/08

Ch.7 #12.

1.

Year Nominal GDP Billions, Price Index (1996 = 100) Real GDP, Billions 1960$ 527.422.19$2376.75

1968911.526.29$34.6709

19782295.948.22$47.6130

19884742.580.22$59.1186

19988790.2103.22$85.159

Ch 20 #2

1.Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand elasticity of demand for each of thefour possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand iselastic in the northwest segment of the demand curve and inelastic in the southeast segment. Product PriceQuality Demanded

$51

Vb 42

33

24

15

Answer: 1/1.5 / ¼.5= .67%/ 22%= 3.05

Ch 22 #7

1.Key Question A firm has fixed costs of $60 and variable costs as indicated in the table on the following page. Complete the table and check your calculations by referring to question 4 at the end of Chapter 23.

1.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 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 nontechnical terms why the MC curve intersects boththe AVC and the ATC curves at their minimum points. 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 $10 less at each level of output. Total Product Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost 0$__60_ $0$___ $___ $___ $___ $___

1 60 45 105 60 45 105 45___

2 60 85145 120...

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