Table 1 A Production Function and Total Cost: Hungry Helens Cookie Factory

1
Table 1 A Production Function and Total Cost
Hungry Helens Cookie Factory
2
Table 2 The Various Measures of Cost Helens
Lemonade Stand
3
Figure 1 Thirsty Thelmas Average-Cost and
Marginal-Cost Curves
Costs
3.50
3.25
3.00
2.75
2.50
2.25
MC
2.00
1.75
ATC
1.50
1.25
AVC
1.00
0.75
0.50
AFC
0.25
Quantity
0
1
4
3
2
7
6
5
9
8
10
of Output
(glasses of lemonade per hour)
4
Figure 2 Cost Curves for a Typical Firm
1. Marginal Cost declines at first and then
increases due to diminishing marginal product.
Costs
2. AFC, a short-run concept, declines throughout.
3.00
3.ATC is a U-shaped curve.
4. Note how MC hits ATC at its minimum point.
2.50
MC
2.00
1.50
ATC
AVC
1.00
0.50
AFC
0
4
2
6
8
14
12
10
Quantity of Output
5
Figure 3 Average Total Cost in the Short and Long
Run
Average
Total
Cost
0
Output
6

• Farmer McDonald gives banjo lessons for 20 an
  hour. One day, he spends 10 hours planting 100
  worth of seeds on his farm. What opportunity cost
  has he incurred? What cost his accountant
  measure? If these seeds will yield 200 worth of
  corps. Accounting profit? Economic profit?
• If farmer McDonald plants no seed on hid farm, he
  gets no harvest. If he plants 1 bag of seeds, he
  gets 3 bushels of wheat. If he plants 2 bags, he
  gets 5 bushels. If he plants 3 bag, he get 6
  bushels. A bag of seeds cost 100, and seeds are
  his only cost. Production Function? Total cost
  curve?