The cost function of a firm which produces plastic plates is shown in the table below.
Use the information in the table to answer the questions that follow:
Output
(in cartons) |
Total Valuable Cost
(TVC) |
Total Cost
(TC) |
Average Cost
(AC) |
Marginal Cost
(MC) |
0 |
- |
100 |
- |
|
1 |
250 |
350 |
350 |
- |
2 |
450 |
P |
275 |
200 |
3 |
575 |
675 |
R |
125 |
4 |
600 |
700 |
175 |
25 |
5 |
675 |
Q |
155 |
75 |
6 |
825 |
925 |
S |
150 |
(a) (i) What is Average Fixed Cost (AFC)?
(ii) Calculate the average fixed cost at output levels 1 to 6.
(b) Calculate the values P, Q, R and S.
(c) Why does the average fixed cost decline as output increases?
(a) (i) What will be the total revenue of the fanner if the price of cashew nuts is $40 per tonne?
(ii) What will be the total revenue of the farmer at the new equilibrium as the demand curve
shifts to
D1D1
(b) What change occurs in the total revenue of the farmer when the price rises from $40 to
$80 per tonne.
.
(c) Use the figure in the diagram to determine
(i) the elasticity of supply for cashew nuts;
(ii) interpret your answer in (c)(i)
(d) Give two reasons for the shift in the demand curve from DO to D1D1?