TUTORIAL 7 1. Complete the table below Total Average Total Average Average Quantity Fixed Fixed Variable Variable Total Total Marginal of Output, Cost Cost Cost Cost Cost Cost Cost Q (TFC) (AFC) (TVC) (AVC) (TC) (ATC) (MC) 0 $200 SO $200 30 2 $200 50 $200 (F) $200 130 5 $200 (G) a) What is the typical shape of the AFC curve? Explain why is it shaped this way. b) Define economies of scale and give two reasons why a firm may experience economies of scale. c) Describe the law of diminishing marginal returns. How does it relate to the shape of the marginal cost (MC) curve? d) Explain the difference between the law of diminishing marginal returns and diseconomies of scale. e) Calculate total fixed cost, total variable cost, marginal cost and average fixed cost. Then draw a graph for each. Quantity of Output Total Cost 0 $100 $170 $220 3 $280 4 $355 $445 6 $545