Fluent Essays

1.Fully explain the relationship between various short-term costs and the cost minimization output, specifically that MC=ATC at the lowest point as indicated in the excel sheet and illustrated in the graph showing all the various costs and the cost minimization output. 2. describing the relationship among the costs. I have attached a brief that someone did for you to get an idea And I need two references please don’t forget to put citations . Business Brief Short run cost is defined as a period when at minimum one of the firm’s input quantities is fixed. This means the period in which at least one of the firm’s input cannot vary. Minimizing the firm’s cost of production is subject to a firm producing a given amount of output (Economic help, 2016). There are always difficulties in identifying the input combination that reduces a firm’s total cost of producing at a level of output and a firm that wants to minimize or reduce its cost of producing a given amount of output is known as a cost-minimizing firm. Relationship between short-run costs Fixed cost is the value of fixed inputs; it doest not change with output. The capital cost constitutes the firm’s total fixed cost, the composition of the firm’s cost that is output insensitive. While the sensitive of output varies in terms of total variable cost. For example, the firm’s expenditure on labor goes up or down as the firm produces more or less output. Firm’s labor thus constitutes its total variable cost which is part of the output-sensitive component of the costs. (variable cost changes as labor and output increases or decreases). In short-run, the total cost is calculated as fixed cost added with variable cost. The total cost also changes as there is an increase in cost components (labor, output, and variable) taking into consideration the constant fixed costs (appendix A and B).In short run cost of production, the average fixed cost can be said to be the division of fixed cost by each level of output. Looking at the appendix, as the output increases the average fixed costs declines. Average variable cost (AVC) equal to variable cost divided by the level of output at each point in time. Looking at the appendix, at a level of output the AVC declines but at the end, it goes up. This was due to no significant increase in the variable cost, total cost, and the output. Average variable cost declines because the firm spends more on quantity produced. Average cost is the total cost divided by output. The average cost declines as the output increases (the level of output is a major determinant of it average cost). It can also be the sum of average fixed cost and average variable cost (appendix A and C). Marginal cost measures the increase (or decrease) in total cost if increasing (or decreasing) the output level by one unit. In determining how many units to produce, the most crucial variable is a marginal cost. The change in cost caused by a change in output, derived by dividing the change in total cost by the change in output quantity (appendix A and C). References Economics Help. (2016). Costs and Cost Minimization February 21, 2017, from http://www.fep.up.pt/docentes/moutinho/micro/Besanko-ch07.pdf Appendix A Short Run Total Cost Labor Output Fixed Cost Variable Cost Total Cost AFC AVC AC MC 0 0 100 0.00 100.00 #DIV/0! #DIV/0! #DIV/0!   1 2 100 165.00 265.00 50.00 82.50 132.50 82.50 2 6 100 420.00 520.00 16.67 70.00 86.67 63.75 3 9 100 630.00 730.00 11.11 70.00 81.11 70.00 4 11 100 795.00 895.00 9.09 72.27 81.36 82.50 5 12 100 915.00 1015.00 8.33 76.25 84.58 120.00 6 13 100 1125.00 1225.00 7.69 86.54 94.23 210.00 Fixed Equipment 100 Materials (per unit) 45 Each Worker up to 5 75 Each worker after 5 90 Appendix B Appendix C AFC, AVC, AC, and MC AFC 2 6 9 11 12 13 50 16.666666666666668 11.111111111111111 9.0909090909090917 8.3333333333333339 7.6923076923076925 AVC 82.5 70 70 72.272727272727266 76.25 86.538461538461533 AC 132.5 86.666666666666671 81.111111111111114 81.36363636363636 84.583333333333329 94.230769230769226 MC 82.5 63.75 70 82.5 120 210 Fixed, Variable, and Total Cost Fixed Cost 0 2 6 9 11 12 13 100 100 100 100 100 100 100 Variable Cost 0 2 6 9 11 12 13 0 165 420 630 795 915 1125 Total Cost 0 2 6 9 11 12 13 100 265 520 730 895 1015 1225 Sheet1 Short Run Total Cost Labor Output Fixed Cost Material Labor Variable Cost Total Cost AFC AVC AC MC 0 0 40 0 0 0 40.00 ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#VALUE! 1 2 40 10 12 22 62.00 20.00 11.00 31.00 11.00 2 6 40 30 24 54 94.00 6.67 9.00 15.67 8.00 3 9 40 45 36 81 121.00 4.44 9.00 13.44 9.00 4 11 40 55 48 103 143.00 3.64 9.36 13.00 11.00 5 12 40 60 60 120 160.00 3.33 10.00 13.33 17.00 6 13 40 65 90 155 195.00 3.08 11.92 15.00 35.00 Fixed Equipment 40 Materials (per unit) 5 Each Worker up to 5 12 Each worker after 5 15 Fixed, Variable, and Total Cost Fixed Cost 0 2 6 9 11 12 13 40 40 40 40 40 40 40 Variable Cost 0 2 6 9 11 12 13 0 22 54 81 103 120 155 Total Cost 0 2 6 9 11 12 13 40 62 94 121 143 160 195 AFC, AVC, AC, and MC AFC 2 6 9 11 12 13 20 6.666666666666667 4.4444444444444446 3.6363636363636362 3.3333333333333335 3.0769230769230771 AVC 11 9 9 9.3636363636363633 10 11.923076923076923 AC 31 15.666666666666668 13.444444444444445 13 13.333333333333334 15 MC 11 8 9 11 17 35