Calculate variable cost, average fixed cost, average variable cost, average total cost, and marginal cost. What is the efficient scale of Yasir’s tea stall? iii. Graph the curves for total cost, ATC, AVC, AFC, MC. Explain shape of these curves and the relationship between ATC and MC.
Calculate variable cost, average fixed cost, average variable cost, average total cost, and marginal cost. What is the efficient scale of Yasir’s tea stall? iii. Graph the curves for total cost, ATC, AVC, AFC, MC. Explain shape of these curves and the relationship between ATC and MC.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider the following cost information for Yasir’s tea stall.
(Cups of tea per hour) |
Total Cost in Rs. |
0 |
30 |
1 |
33 |
2 |
38 |
3 |
45 |
4 |
54 |
5 |
65 |
6 |
78 |
7 |
93 |
8 |
110 |
9 |
129 |
10
|
150 |
If Yasir’s fixed cost is Rs. 30
- Calculate variable cost, average fixed cost,
average variable cost , average total cost, and marginal cost.
- What is the efficient scale of Yasir’s tea stall?
iii. Graph the
- Over time Yasir decides to expand his business. In the long run he first experiences economies of scale, followed by constant returns to scale and finally diseconomies of scale as the output increases. Draw a diagram of his ATC in the short run and the long run. Explain this diagram in detail.
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