Question 1.
A firm faces fixed costs of £45 and a short-run variable costs (SAVC).
Output SAVC SAFC SATC STC SMC
1 17
2 15
3 14
4 15
5 19
6 29
(a) State clearly the formula for calculating SAFC SATC STC and SMC, where SAFC is the short-run average fixed cost; SATC is the short-run average total cost; STC is the short-run total cost; and SMC is the short-run marginal cost
(b) Use the formulas stated at (a) to calculate (by showing workings) SAFC SATC STC and SMC, where SAFC is the short-run average fixed cost; SATC is the short-run average total cost; STC is the short-run total cost; and SMC is the short-run marginal cost.
(c) Fill in the remainder of the table, where SAFC is the short-run average fixed cost; SATC is the short-run average total cost; STC is the short-run total cost; and SMC is the short-run marginal cost.
(d) Plot SAVC, SAFC, SATC and SMC, on a graph checking that SMC goes through the minimum points of SAVC and SATC.
(e) The firm finds that it is always receiving orders for six units per week. Advise the firm on how to minimize its costs in the long run.
Question 2
Short- and long run decisions
Short-run decisions Long-run decisions
Price Produce Produce Close Produce Produce Close
at a profit at a loss down at a profit at a loss down
18.00
5.00
7.00
13.00
11.50
Cost conditions are such that LAC is £12; SATC is £17 (made up of SAVC £11 and SAFC £6).
Use the information provided above to calculate (show workings)
i). Produce at profit; produce at a loss; and close down for short-run decisions
ii). Produce at profit; produce at a loss; and close down for Long-run decisions
iii). Use the calculations from (i) and (ii) to fill in the table above.
Question 3
(a) What type of costs do aircrafts represent to airlines?
(b) Explain and evaluate the different strategies used by airlines to deal with the cost of running A380?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more