Question

Please answer in excel only. How do I create the graphs in excel and show the data.

Discuss the following two cost functions:

TC=20+4Q

TC=20+2Q+0.5Q^2

a) Calculate all cost curves and plot these curves on graphs.

Total Cost

Total Fixed Cost

Total Variable Cost

Average Total Cost

Average Fixed Cost

Average Variable Cost

Marginal Cost

b) In each case, indicate the point at which diminishing returns occur.

(For question a), compute the required costs and plot the curves for quantities 1 to 20)

Answer 1

Q	TC =20+4Q	TFC	TVC	ATC=TC/Q	AFC=TFC/Q	AVC=TVC/Q	MC=4
1.00	24.00	20	4	24.00	20.00	4
2.00	28.00	20	8	14.00	10.00	4	4
3.00	32.00	20	12	10.67	6.67	4	4
4.00	36.00	20	16	9.00	5.00	4	4
5.00	40.00	20	20	8.00	4.00	4	4
6.00	44.00	20	24	7.33	3.33	4	4
7.00	48.00	20	28	6.86	2.86	4	4
8.00	52.00	20	32	6.50	2.50	4	4
9.00	56.00	20	36	6.22	2.22	4	4
10.00	60.00	20	40	6.00	2.00	4	4
11.00	64.00	20	44	5.82	1.82	4	4
12.00	68.00	20	48	5.67	1.67	4	4
13.00	72.00	20	52	5.54	1.54	4	4
14.00	76.00	20	56	5.43	1.43	4	4
15.00	80.00	20	60	5.33	1.33	4	4
16.00	84.00	20	64	5.25	1.25	4	4
17.00	88.00	20	68	5.18	1.18	4	4
18.00	92.00	20	72	5.11	1.11	4	4
19.00	96.00	20	76	5.05	1.05	4	4
20.00	100.00	20	80	5.00	1.00	4	4

TC	TFC	TVC	ATC=TC/Q	AFC=TFC/Q	AVC=TVC/Q	MC=Q+2
22.50	20	2.50	22.50	20.00	2.50
26.00	20	6.00	13.00	10.00	3.00	4.00
30.50	20	10.50	10.17	6.67	3.50	5.00
36.00	20	16.00	9.00	5.00	4.00	6.00
42.50	20	22.50	8.50	4.00	4.50	7.00
50.00	20	30.00	8.33	3.33	5.00	8.00
58.50	20	38.50	8.36	2.86	5.50	9.00
68.00	20	48.00	8.50	2.50	6.00	10.00
78.50	20	58.50	8.72	2.22	6.50	11.00
90.00	20	70.00	9.00	2.00	7.00	12.00
102.50	20	82.50	9.32	1.82	7.50	13.00
116.00	20	96.00	9.67	1.67	8.00	14.00
130.50	20	110.50	10.04	1.54	8.50	15.00
146.00	20	126.00	10.43	1.43	9.00	16.00
162.50	20	142.50	10.83	1.33	9.50	17.00
180.00	20	160.00	11.25	1.25	10.00	18.00
198.50	20	178.50	11.68	1.18	10.50	19.00
218.00	20	198.00	12.11	1.11	11.00	20.00
238.50	20	218.50	12.55	1.05	11.50	21.00
260.00	20	240.00	13.00	1.00	12.00	22.00

b)

TC=20+4Q
MC = 4
MC’=0, there is no diminishing returns but there are constant returns

TC= 20+2Q+0.5Q^2
MC = 2+Q
MC’=1, so diminishing returns are from the beginning (Q = 0)