A company, Megah Setia, has the following cost structure: Output (quantity) Total fixed cost (RM) Total...

A company, Megah Setia, has the following cost structure:

Output (quantity)	Total fixed cost (RM)	Total variable cost (RM)	Average fixed cost	Average total cost	Marginal cost
0	2000	0
2	2000	4000
4	2000	10000
6	2000	12000
8	2000	13000
10	2000	14000

Is it a long run cost structure? Explain your answer briefly.
Complete the appropriate numbers in the column of “Average fixed cost”.
Complete the appropriate numbers in the column of “Average total cost”.
Complete the appropriate numbers in the column of “marginal cost”.

Expert Solution

Ans i) No, its not a long run strutcure because the long run is the period of time when all costs are variable. The long run depends on the specifics of the firm in question. It is not a precise period of time. No costs are fixed in the long run. A firm can build new factories and purchase new machinery, or it can close existing facilities. In planning for the long run, the firm will compare alternative production technologies (or processes).

AFC = TFC / Q

TC = TFC+ TVC

ATC = TC / Q

MC = TC_n - TC_n-1

output	Total fixed cost	Total variable cost	Average fixed cost	Total cost	Average Total cost	Marginal cost
0	2000	0	2000/0 =	2000+0=2000	2000/0 =	___
2	2000	4000	2000/2 = 1000	2000+4000= 6000	6000/2 = 3000	6000-2000=4000
4	2000	10000	2000/4 = 500	2000+10000 = 12000	12000/4 = 3000	12000-6000=6000
6	2000	12000	2000/6 = 333	2000+12000= 14000	14000/6 = 2333	14000-12000=2000
8	2000	13000	2000/8 = 250	2000+13000= 15000	15000/8 = 1875	15000-14000=1000
10	2000	14000	2000/10 = 200	2000+14000= 16000	16000/10 = 1875	16000-15000=1000

Rahul Sunny answered 1 year ago

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