Economics Assignment: Business Decision Making, Market Structures, and Government Intervention

Running Head: ECONOMICS ASSIGNMENT.
ECONOMICS ASSIGNMENT
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Table of Contents
LO 3: SECTION A- Business Decision making.............................................................................1
Question 1: BUSINESS DECISION MAKING..........................................................................1
Question 2: TYPES OF MARKET STRUCTURES...................................................................4
Question 3: MC, ATC AND AVC CURVES..............................................................................6
Question 4: COMPARATIVE ANALYSIS................................................................................7
LO 4: SECTION B: The Role of Government in markets..............................................................8
QUESTION ONE: GOVERNMENT INTERVENTION IN MARKET....................................8
Question 2: MARGINAL SOCIAL COST AND MARGINAL BENEFIT COST CURVES.. 10
References......................................................................................................................................11
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Economics Assignment.
LO 3: SECTION A- Business Decision making.
Question 1: BUSINESS DECISION MAKING.
The cost structure of Red T-shirt manufacturing company is shown in the Table below.
Labour as
a factor of
production
Output
(Q)
Total
Fixed
Cost
Total
Variable
Cost
Tota
l
Cost
Average
Cost
Marginal
Cost
Average
Variable
Cost
Average
Fixed
Cost
No. of
Workers
daily
No. of T-
shirts
produced
daily
0 0 25 0 25 ∞ - 0.000 ∞
1 4 25 25 50 12.500 6.250 6.250 6.250
2 10 25 50 75 7.500 4.166 5.000 2.500
3 13 25 75 100 7.686 8.333 5.768 1.922
4 15 25 100 125 8.333 12.500 6.668 1.667
5 16 25 125 150 9.375 25.000 7.813 1.563
i. Complete the table above.
a. Total Cost is given as 25 in row 1 where number of workers is given as 0 and we know
that TC = TFC + TVC. Total Fixed Cost does not vary its constant throughout the
production period hence the Total Fixed Cost here remain constant (Arthur, 2018). For
instance, 25.
TFC = TC + TVC
TFC = 25 + 0
TFC = 25
b. TC = TFC + TVC. Total cost is the Total value the total value of fixed cost and value of
variable cost (Vasigh, Fleming, & Tacker, 2018).
In the number of workers daily 1 the TC = 25 + 25 = 50
2 the TC = 25 + 50 = 75
3 the TC = 25 + 75 = 100
4 the TC = 25 + 100 = 125
5 the TC = 25 + 125 = 150
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c. AC=TC/Q where, AC is Average Total Cost and is defined as the Total Cost divided by
output. TC is Total Cost and Q is the Output (Talley, 2017).
For the worker/day 0=25/0=infinity
1=50/4=12.500
2=75/10=7.500
3=100/13=7.686
4 =125/15=8.333
5 = 150/16=9.375
d. MC=Change in TC/Change in Q where MC is derived from dividing a unit change in
Total cost per by a unit change in output (Turvey, 2017).
For the worker/day 0=−
1=50-25/4-0=6.250
2=75-25/10-4=4.166
3=100-75/13-10=8.333
4=125-100/15-13=12.500
5=150-125/16-15=25.000
e. AVC = VC/Q Average Variable cost are firms variable cost which include the labour,
electricity per unit quantity of output produced (Holloway, 2017).
For the worker/day 0=0/0=0
1=25/4=6.250
2=50/10=5.000
3=75/13=5.768
4=100/15=6.66
5=125/16=7.813
f. AFC=FC/Q Average fixed cost is derived at by dividing the total fixed costs by output
realised in a production process (Borenstein, 2016).
For the worker/day 0=25/0=INFINITY
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