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    Seminar 10.1

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    Haqeemy Fakhrizzakie Mohd Yusri
    1. The document provides information about costs, revenues, and profits for various firms including: a table with output, total costs, average costs, and marginal costs; a diagram to plot average and marginal cost curves; and questions about profit maximization using total revenue and total cost curves and average revenue, marginal revenue, average cost, and marginal cost curves. 2. It asks the reader to calculate values like total fixed costs, average fixed costs, total variable costs, average variable costs, output quantities that maximize profits, and break-even points using the data and concepts of revenues, costs, and profits. 3. The questions guide the reader in skills like completing tables, drawing curves,

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    Seminar 10.1

    Uploaded by

    Haqeemy Fakhrizzakie Mohd Yusri
    13 views6 pages
    1. The document provides information about costs, revenues, and profits for various firms including: a table with output, total costs, average costs, and marginal costs; a diagram to plot average and marginal cost curves; and questions about profit maximization using total revenue and total cost curves and average revenue, marginal revenue, average cost, and marginal cost curves. 2. It asks the reader to calculate values like total fixed costs, average fixed costs, total variable costs, average variable costs, output quantities that maximize profits, and break-even points using the data and concepts of revenues, costs, and profits. 3. The questions guide the reader in skills like completing tables, drawing curves,

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    1. The document provides information about costs, revenues, and profits for various firms including: a table with output, total costs, average costs, and marginal costs; a diagram to plot average and marginal cost curves; and questions about profit maximization using total revenue and total cost curves and average revenue, marginal revenue, average cost, and marginal cost curves. 2. It asks the reader to calculate values like total fixed costs, average fixed costs, total variable costs, average variable costs, output quantities that maximize profits, and break-even points using the data and concepts of revenues, costs, and profits. 3. The questions guide the reader in skills like completing tables, drawing curves,

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views6 pages

    Seminar 10.1

    Uploaded by

    Haqeemy Fakhrizzakie Mohd Yusri
    1. The document provides information about costs, revenues, and profits for various firms including: a table with output, total costs, average costs, and marginal costs; a diagram to plot average and marginal cost curves; and questions about profit maximization using total revenue and total cost curves and average revenue, marginal revenue, average cost, and marginal cost curves. 2. It asks the reader to calculate values like total fixed costs, average fixed costs, total variable costs, average variable costs, output quantities that maximize profits, and break-even points using the data and concepts of revenues, costs, and profits. 3. The questions guide the reader in skills like completing tables, drawing curves,

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    Foundation, Study and Language Institute (FSLI)

    International Foundation Programme (IFP)


    Economics (EC0ECO)

    Worksheet for Seminar 10.1: Revenues, Costs and Profits


    Gillespie: Unit 11

    1. Complete the following table of costs for a firm:

    Output TC (£) AC (£) MC (£)


    0 55
    1 85
    2 110
    3 130
    4 40
    5 42
    6 280
    7 90
    8 110
    9 610
    10 150

    a. How much is total fixed cost at:


    i. an output of 0?
    ii. an output of 6?

    b. How much is average fixed cost at:


    i. an output of 5?
    ii. an output of 10?

    c. How much is total variable cost at an output of 5?

    d. How much is average variable cost at an output of 10?


    2. Referring to the data from question 1, draw the firm’s average and marginal cost
    curves on the following diagram. (Remember to plot MC mid-way between the
    quantity figures).

    a. Mark on the diagram the output at which diminishing returns set in.

    b. Assume that the firm is a price taker and faces a market price of £60 per unit.
    Draw the firm’s AR and MR curves on the above diagram.

    c. How much will the firm produce in order to maximise profit?

    d. Shade in the amount of profit it makes.

    e. Calculate how much profit this is.


    3. Now assume that firm T faces a downward-sloping (straight-line) demand curve.

    Price (AR) Quantity Total Revenue (TR) Marginal Revenue (MR)


    (£) (units) (£) (£)
    20 0
    18 1
    16 2
    14 3
    12 4
    10 5
    8 6
    6 7

    a. Fill in the columns for TR and MR in the table above.

    b. What is the price elasticity of demand at P = £10?

    c. Over what price range is demand price elastic?

    d. Over what price range is demand price inelastic?


    4. There are two methods of showing the profit-maximising position for a firm. One of
    them is using total revenue and total cost curves. The figure below shows the total
    cost and revenue curves for a firm on the same diagram.
    60

    50
    Costs and Revenues (£).

    40

    30
    Total Revenue
    Total Cost
    20

    10

    0
    0 10 20 30 40 50 60 70 80 90
    Quantity

    a. At what output is the firm’s profit maximised?

    b. How much profit is made at this output?

    c. Draw the total profit TΠ curve over the range of output where positive profit is
    made.

    d. How much is total fixed cost?

    e. At what output is the price elasticity of demand equal to -1?

    f. At what outputs does the firm break even?


    5. The second method of showing the profit-maximising position is to use AR, MR, AC
    and MC curves. The following table gives a firm’s average and marginal cost and
    revenue schedules for the production of good X.

    Average Marginal
    Quantity Average Cost Marginal Cost Revenue Revenue
    (units) (£) (£) (£) (£)
    100 4.80 1.40 3.20 3.20
    200 3.60 0.80 3.20 3.20
    300 2.90 0.85 3.20 3.20
    400 2.45 1.30 3.20 3.20
    500 2.30 2.30 3.20 3.20
    600 2.55 4.00 3.20 3.20
    700 3.05 6.30 3.20 3.20

    a. Draw the AC, MC, AR and MR curves on the diagram below.

    b. Explain the shape of the AR curve.

    c. At what output is profit maximised?

    d. How much is average cost at this output?

    e. How much is average profit at this output?

    f. Shade in the area representing maximum total profit in the above diagram.

    g. How much is the maximum total profit?


    h. What is the lowest price the firm could receive if it were not to make a loss?
    6. Biscoe is a craft business making clocks.
    • Selling price per clock £30
    • Raw materials per clock £5
    • Wages per clock £10

    Weekly fixed expenses:


    • rent and rates £370
    • fuel and power £50
    • other costs £30

    a. Use the following information to complete the finance table:

    Total Variable
    Quantity Fixed Cost Total Cost Profit/Loss
    Revenue Cost
    (units) (£) (£) (£)
    (£) (£)
    0
    10
    15
    20
    25
    30
    37
    43

    b. Using the formula below, calculate the breakeven point for Biscoe.
    𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
    Breakeven = 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

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