The question is on the attached image **Exercise 2.5: Cost Analysis of a Firm**A firm's costs are given in the following table, which you need to complete. The columns represent different cost components and related calculations for varying quantities of production $ q $.| $ q $ | TC | TFC | TVC | AVC | ATC | MC ||--------|-----|-----|-----|-----|-----|-----|| 0 | $50 | – | – | – | – | – || 1 | 70 | – | – | – | – | – || 2 | 80 | – | – | – | – | – || 3 | 90 | – | – | – | – | – || 4 | 110 | – | – | – | – | – || 5 | 140 | – | – | – | – | – || 6 | 175 | – | – | – | – | – || 7 | 220 | – | – | – | – | – || 8 | 280 | – | – | – | – | – || 9 | 360 | – | – | – | – | – || 10 | 450 | – | – | – | – | – |**Tasks:**a. **Complete the Table:** - Fill in the missing values for Total Fixed Cost (TFC), Total Variable Cost (TVC), Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC).b. **Graph Costs:** - Plot the Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC) on the same graph. - Analyze the relationship between Marginal Cost (MC)

The total cost incurred by firms operating in a market includes fixed costs and variable costs. Fixed costs are the costs that will not change when there is a change in the quantity of output. variable costs will change when there is a change in the quantity of output. Marginal cost is the cost of producing one more unit of output. Average cost is the cost of producing one unit of output.a)The total cost at quantity zero is $50. Therefore the total fixed cost is $50. The total variable cost is calculated by subtracting the total fixed cost from the total cost. Average variable cost is calculated by dividing the total variable cost by quantity of output. Average total cost is calculated by dividing total cost by quantity of output. Marginal cost is calculated by dividing the change in total cost by change in output. TVC=TC-TFCAVC=TVCQATC=TCQMC=Change in TCChange in Q Q TC TFC TVC AVC ATC MC 0 50 50 0 - - - 1 70 50 20 20 70 20 2 80 50 30 15 40 10 3 90 50 40 13.33 30 10 4 110 50 60 15 27.5 20 5 140 50 90 18 28 30 6 175 50 125 20.83 29.17 35 7 220 50 170 24.29 31.43 45 8 280 50 230 28.75 35 60 9 360 50 310 34.44 40 80 10 450 50 400 40 45 90 b)The graph of ATC, AVC, and MC is given in the figure below. The graph shows that, when marginal cost is less than the average total cost, the average total cost is decreasing. When MC is more than the ATC, then ATC is increasing. At the minimum point of ATC, MC and ATC are equal. The graph shows that, when marginal cost is less than the average variable cost, the average total variable is decreasing. When MC is more than the AVC, then AVC is increasing. At the minimum point of AVC, MC and AVC are equal. c)The profit is maximized at the level of output where the marginal cost is equal to the marginal revenue. When the price is $20, the marginal revenue is $20. The marginal revenue and marginal cost are equal at output level 4. Therefore the firms will produce 4 units of output. Profit is calculated by subtracting total cost from total revenue. Profit=TR-TC=4×$20-110=-$30 Therefore the profit is -$30. d)Similarly, if the price is $60, the firm will produce 8 units. The profit is $200

Business

Economics

2.5 A firm's costs are given in the following table. TC TFC TVC AVC АТС MC $50 1 70 80 3. 90 4. 110 5 140 175 220 280 360 10 450 a. Complete the table. b. Graph AVC, ATC, and MC on the same graph. What is the relationship between MC and ATC and between MC and AVC? c. Suppose market price is $20. How much will the firm produce in the short run? How much are total profits? d. Suppose market price is $60. How much will the firm produce in the short run? What are total profits? 678969

2.5 A firm's costs are given in the following table. TC TFC TVC AVC АТС MC $50 1 70 80 3. 90 4. 110 5 140 175 220 280 360 10 450 a. Complete the table. b. Graph AVC, ATC, and MC on the same graph. What is the relationship between MC and ATC and between MC and AVC? c. Suppose market price is $20. How much will the firm produce in the short run? How much are total profits? d. Suppose market price is $60. How much will the firm produce in the short run? What are total profits? 678969

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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