11 Aug Explain how the relationship between Marginal Cost and Marginal Revenue may affect the output decision in J Core’s firm
Learning Outcomes 7, 1 , 9 and 10
Presentation:
- This assignment is to be word processed
- The cost table must be completed and included with your completed assignment
- All sources must be referenced appropriately
- Fixed Cost
- Variable Cost
- Total Cost
- Average Total Cost (Average Cost)
- Marginal Cost
- Average Revenue
- Marginal Revenue
- Profit
- Marginal Productivity of Labour
In November 2019, J. Core set up a business manufacturing and selling wooden office desks and accessories for the Irish market. Due to Covid 19 and the increase of working from home the demand for garden furniture increased steadily and J, Core found that they had to hire more workers and expand scale of production to keep up with demand. The market for office furniture is very competitive. Increased production also meant increased costs and the potential to experience diminishing marginal returns. J. Core needs to keep a close eye on his costs and has drafted the costs table below to help him to manage costs and revenues over his scale of production
Tasks
1. Distinguish between the short run and the long run as used in costing .
2. Define the following costs and related associated terms and explain how they are calculated
3 Complete the following costs table for J Core.
|
Core Ltd
Garden Furniture – Costs Table (€’000) |
||||||||||||||
|
Output |
FC |
VC |
TC |
AVC |
MC |
AC |
AR |
TR |
MR |
Profit |
||||
|
0 |
25 |
– |
25 |
– |
– |
– |
– |
– |
– |
25.00 |
||||
|
50 |
25 |
30 |
55 |
0.60 |
0.60 |
1.10 |
0.60 |
0.60 |
||||||
|
100 |
25 |
55 |
80 |
0.55 |
0.50 |
0.80 |
0.60 |
0.60 |
||||||
|
150 |
25 |
75 |
100 |
0.50 |
0.40 |
0.67 |
0.60 |
0.60 |
||||||
|
200 |
25 |
115 |
0.45 |
0.58 |
0.60 |
120 |
0.60 |
|||||||
|
250 |
25 |
130 |
0.42 |
0.52 |
0.60 |
150 |
0.60 |
|||||||
|
300 |
25 |
122 |
147 |
0.41 |
0.34 |
0.60 |
180 |
0.60 |
||||||
|
350 |
25 |
145 |
170 |
0.41 |
0.46 |
0.60 |
210 |
0.60 |
||||||
|
25 |
180 |
205 |
0.45 |
0.70 |
0.51 |
0.60 |
240 |
0.60 |
||||||
|
25 |
225 |
250 |
0.50 |
0.90 |
0.56 |
0.60 |
270 |
0.60 |
||||||
|
Output |
QL |
MPL |
APL |
|
||||||||||
|
0 |
—- |
—— |
—— |
|||||||||||
|
50 |
5 |
10.0 |
10.0 |
|||||||||||
|
100 |
9 |
12.5 |
11.1 |
|||||||||||
|
150 |
12 |
12.5 |
||||||||||||
|
200 |
14 |
14.3 |
||||||||||||
|
250 |
16 |
15.6 |
||||||||||||
|
300 |
19 |
16.7 |
||||||||||||
|
350 |
23 |
12.5 |
||||||||||||
|
400 |
28 |
10.0 |
||||||||||||
|
450 |
35 |
7.1 |
||||||||||||
4. Graph the AC curve and the MC curve for the data in task 3.
5. Graph the MC curve and MR curve for the data in task 3.
6. Explain Economies of scale .
7.Consider the different approaches accountants and economists take to measuring costs. Include an explanation of why normal profits are considered a cost in economics .
8.Define and explain the term ‘Diminishing Marginal Returns ‘
9.Explain the relationship between Diminishing Marginal Returns and Marginal Cost .
10.Explain the two conditions necessary for profit maximation in the short run?
11.Explain how the relationship between Marginal Cost and Marginal Revenue may affect the output decision in J Core’s firm. (Refer to the Graph in Task 5)
12.What is J Core’s profit maximising output? Show this output on the graph in Task 5 .
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