Complete the following table and graph AVC, ATC, and MC. The best way to submit this assignment is by cutting and pasting the table into a Excel spreadsheet or in a Word Document for the calculations. Submit the completed table and the answers to the questions that follow the table.
The way to derive the costs are the basic formulas:
Total Cost = Fixed cost + variable cost
AVC = Total variable cost/output,
ATC = Total cost/output,
MC = change in the total cost/ change in output
1. What is the shape of the AVC and ATC curves? What economic law accounts for this shape? How do you know this?
2. What is the shape of the MC curve? Why does it have this shape? How do you know this?
3. What do you know about the values of AVC and ATC at the points where MC crosses them?
4. Is the AVC higher than the ATC or lower than it? How do you know this?
5. Is the costs in the short run or the long run? How do you know this?
6. Assume the company above is in a Perfect Competition Industry: If the price of the product is $20 that is sold at, what will be the profits and how many will be sold at that price? Can the company raise the price?
7. Again in a Perfect Competition Industry: What would the profit situation be at a price of $30, how much to sell at that price?
8. With the Perfect Competition industry: What would the profit situation be at a price of $10, how much to sell at that price?
9. What are the characteristics of a perfect competition company and industry?