Worksheet on Short-Run Production Costs: Halloween Costumes

I. Complete the following table:

(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Q	TC	TVC	TFC	ATC	AVC	AFC	MC
0	13	$ 0	$13	$ ---	$ ---	$ ---	$ ---
1	22	9	a	22.00	9.00	13.00	$9.00
2	27	14	13	13.50	7.00	6.50	b
3	33	20	13	c	d	e	6.00
4	f	g	13	10.00	6.75	3.25	h
5	i	j	13	k	l	2.60	10.00
6	63	50	13	10.50	8.33	2.17	13.00
7	80	67	13	11.43	9.57	1.86	17.00

II. Based on the completed table, fill in the blanks in the following sentences:

    1. For the first ____ units, marginal cost falls; after that marginal cost rises.

    2a. For the first ____ units, average variable cost falls; after that average variable cost rises.
    2b. For the first ____ units, marginal cost is not greater than average variable cost; after that, marginal cost is greater than average variable cost.

    3a. For the first ____ units, marginal cost is below average total cost, and average total cost falls.
    3b. For unit number ____, marginal cost equals the average total cost of the preceding units, and average total cost remains the same.
    3c. Beginning with unit number ____, marginal cost is above average total cost, and average total cost rises.

    4. Notice how AVC and ATC change when you incorporate new marginal cost information. You update the average values of anything the same way: add a new marginal value to the total value so far and then compute your new average. Complete the following set of rules to summarize the relationship between marginal and average values:
    For any related marginal and average values:
    --If the marginal value _________ the current average, the average falls.
    --If the marginal value _________ the current average, the average remains constant.
    --If the marginal value _________ the current average, the average rises.