Question
Yarn is a typical firm in the perfectly competitive textile industry. The production of fabric requires a constant-returns-to-scale technology for quantities of output (in thousands
Yarn is a typical firm in the perfectly competitive textile industry.
The production of fabric requires a constant-returns-to-scale technology for quantities of output (in thousands of rolls of fabric) that are less than 10 per day.
When the daily production is greater or equal to 10, decreasing returns to scale kick in.
Assume that the variable cost functions for the two production regions are:
VC = 30Q if Q <10
VC = 30Q + (Q - 10)2
if Q 10
In addition to variable costs, there are fixed costs of operation of $300 per day.
Please Illustrate in a graph the Total Cost, Fixed Cost, Variable Cost, Average Variable Cost, Average Cost and Marginal Cost lines
Q | Fixed cost | Variable cost | Total Cost | Average Variable Cost | Average Cost | Marginal Cost |
0 | 300 | 0 | 300 | |||
1 | 300 | 30 | 330 | 330.00 | 30.00 | 30.00 |
2 | 300 | 60 | 360 | 180.00 | 30.00 | 30.00 |
3 | 300 | 90 | 390 | 130.00 | 30.00 | 30.00 |
4 | 300 | 120 | 420 | 105.00 | 30.00 | 30.00 |
5 | 300 | 150 | 450 | 90.00 | 30.00 | 30.00 |
6 | 300 | 180 | 480 | 80.00 | 30.00 | 30.00 |
7 | 300 | 210 | 510 | 72.86 | 30.00 | 30.00 |
8 | 300 | 240 | 540 | 67.50 | 30.00 | 30.00 |
9 | 300 | 270 | 570 | 63.33 | 30.00 | 30.00 |
10 | 300 | 300 | 600 | 60.00 | 30.00 | 30.00 |
11 | 300 | 331 | 631 | 57.36 | 30.09 | 31.00 |
12 | 300 | 364 | 664 | 55.33 | 30.33 | 33.00 |
13 | 300 | 399 | 699 | 53.77 | 30.69 | 35.00 |
14 | 300 | 436 | 736 | 52.57 | 31.14 | 37.00 |
15 | 300 | 475 | 775 | 51.67 | 31.67 | 39.00 |
16 | 300 | 516 | 816 | 51.00 | 32.25 | 41.00 |
17 | 300 | 559 | 859 | 50.53 | 32.88 | 43.00 |
18 | 300 | 604 | 904 | 50.22 | 33.56 | 45.00 |
19 | 300 | 651 | 951 | 50.05 | 34.26 | 47.00 |
20 | 300 | 700 | 1000 | 50.00 | 35.00 | 49.00
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