ES2550 W6 Analysis2lf

Topics: Costs, Economics of production, Variable cost Pages: 2 (351 words) Published: April 21, 2015
Part I. Consider the values in the following table for the Winsome Widget Factory. Fill in the formula for AFC, AVC, ATC, and MC at the top of the column in the gray section within the table. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, and MC in the blue sections of the table. Winsome Widget Factory

Output
Total Fixed Cost
Total Variable Cost
Total Cost
Average Fixed Cost
Average Variable Cost
Average Total Cost
Marginal Cost
0
600
0
$600
 
 
 
 
5
600
350
900
 120
60
180
60
10
600
750
1,150
 60
55
115
50
15
600
1000
1,350
 40
50
90
40
20
600
1300
1,600
 30
50
80
50
25
600
1675
1,900
 24
52
76
60
30
600
2125
2,275
 20
55.83
71.83
130
40
600
2775
3,375
17.10
60.71
77.86
90
45
600
3625
4,225
15
69.38
84.38
130
50
600
4725
5,325
12
94.50
106.50
220
Identify the efficient scale of firm. Explain your reasoning.

Efficient scale of firm is 30. As this is the minimum output at the minimized average total cost of production. As this is the output where the average total cost is minimum and is the minimum output at that average cost.

Part II. Consider the values in the following table for the Winsome Widget Factory. Winsome Widget Factory
Output
Long Run Average Total Cost
0
------------------
5
170
10
110
15
85
20
83
25
78
30
75
35
75
40
80
45
82
50
97
a) The economies of scale occur for outputs ranging between 5 and 35. Reason: With increasing output, the long run average total cost of production is decreasing. b) The constant rates to scale do not occur.

Reason: At no place is there the same proportional change in output and average total cost of production c) The diseconomies of scale occur for outputs ranging between 35 and 40. Reason: With increasing output, the long run average total cost of production is increasing. Submission Requirements:

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