Problem:
Production and costs
| |
Firm A
|
Firm B
|
Firm C
|
|
Quantity
|
TC
|
ATC
|
TC
|
ATC
|
TC
|
ATC
|
|
1
|
65
|
|
15
|
|
26
|
|
|
2
|
75
|
|
29
|
|
39
|
|
|
3
|
85
|
|
44
|
|
54
|
|
|
4
|
95
|
|
61
|
|
71
|
|
|
5
|
105
|
|
80
|
|
90
|
|
|
6
|
115
|
|
101
|
|
111
|
|
|
7
|
125
|
|
124
|
|
134
|
|
| |
|
|
|
|
|
|
TC - total costATC- Average total cost
1. Calculate the ATC for each firm
2. Use the ATC to describe whether each firm exhibits decreasing, increasing or constant returns to scale
B.Explain with the aid of a diagram the relationship between marginal cost, average variable cost andaverage total cost.
C.Carefully explain what is meant by explicit, implicit and sunk costs.How are they used to calculate accounting profit and economic profit?