Reference no: EM133204171 , Length: 3 Pages

Assignment:

Instructions

1) Complete the following table:

Quantity	TVC	TFC	TC	AVC	AFC	ATC	MC	PRICE
0	0	50						80
1	50							80
2	90							80
3	110							80
4	150							80
5	210							80
6	290							80
7	410							80

1. After which quantity level does diminishing marginal returns begin?
2. Which level of production (quantity) maximizes profit for a perfectly-competitive firm?
3. What would be the profit at the profit maximizing level of output?

After answering the above questions and completing the table, compose a 3 page write up explaining the essentials of production cost to your manager who doesn't understand why you would not continue to increase output infinitely. Be sure in your write up to, not only address the questions above but, include the following:

• Why the cost of production diminishes at first and then rises
• Why some costs remain constant at all levels of production
• What the profit maximizing level of output means and why it is not necessarily at the maximum level of workers given in the table
• What happens if you continue to increase output above the profit maximizing level
• Whether this is a long run view or a short run view