# College of San Mateo Microeconomics Worksheet

Description

Review
Output
0
1
2
3
4
5
6
7
Name: ______________Xiankang Xu________________
Price
\$200
200
200
200
200
200
200
200
TC
\$400
500
550
610
700
830
1030
1305
FC
400
400
400
400
400
400
400
400
VC
0
100
150
210
300
430
630
905
ATC
AFC
AVC
500
400
100
275
200
75
203.33 133.33
70
175
100
75
166
80
86
171.67 66.67
105
186.43 57.14 129.29
1.
Complete the Table.
2.
How are TC, FC, and VC related to each other and to output?
MC
100
50
60
90
130
200
275
TR
200
400
600
800
1000
1200
1400
MR
200
200
200
200
200
200
200
Profit
-400
-300
-150
-10
100
170
170
95
Here the “FC” is fixed at “400” and will be fixed for all level of “Q”. Now, “VC” is increasing as “Q” increases the
corresponding variable cost also increases. Now, the “TC” is the sum of “FC” and “VC”, => “TC” is also increasing as
“Q” increases. So, we can say that “TC” and “VC” are increasing for “Q”.
3.
How are ATC, AFC, and AVC related to each other and to output? (What shape are these curves and why?)
“ATC” is the total cost per unit of output, “”AFC” is the fixed cost per unit of output and “AVC” is the variable cost per
unit of “Q”. Now, as “FC” is fixed and will be same, => the “AFC” is falling as “Q” increases. “AVC” is “U-shaped”, =>
“AVC” decreases as “Q” increases and reached the minimum at “q=4” then it further starts increases as “Q” increases.
Now, “ATC” is the sum of “AFC” and “AVC”, => it is also “U-shaped” curve. So, it is decreasing as “q” increases and
reached the minimum at “q=5” then further starts increasing.
4.
Why is the MC curve shaped the way it is? At which unit of output does diminishing returns set in?
“MC” is also “U-shaped”, => “MC” is falling and reached the minimum at “q=2” then it starts increasing as “q” increase.
So, here after “q=2” its increasing, => “diminishing returns to productivity” works after “q=2”, => “MC” is falling.
5.
What is the relationship between ATC, AVC, and MC?
6.
How many units should be produced to maximize profit? What are the two ways can you determine where to maximize
profit?
7.
What type of market structure is this firm? How can you tell?
8.
If demand decreases causing the price of the product fall to \$130, how many units should the firm produce? How much
profit are they making? Will they continue to produce or shut down at this price?
9.
Draw a graph for the market and a graph for the firm showing the original situation and then the change from #8.
10.
What is the firms short run shut down price? What is the firms long run shut down price?