NURUL LIYANA ABD RAHMAN

2019171671
AT220 4B

TUTORIAL 1

QUESTION 1

a. Discuss the cost components involved in short run production function.

There are so many type of cost that contain in short run production. Firstly are,
fixed cost will never change even though in any level of production. Does not matter
how many production produce, it is big or little amount of it. Besides, Variable costs
can be define as an incurred in the act of producing when the more the production
produce, the greater the variable cost are. Variable costs also can be include with raw
materials. Next, Average total cost also called simply average cost is when total cost
divided by the quantity of output of the production itself. Average variable
cost obtained when variable cost is divided by quantity of output. Also, as output
grows, fixed costs become relatively less important (since they do not rise with
output), so average variable cost sneaks closer to average cost. Lastly, marginal cost is
the additional cost of producing one more unit of the output. It can be calculated by
taking the change in total cost and then dividing it by the change in quantity.

b. Decision rules for short run and long run production function.

Quantity of labour is variable but the quantity of capital and production

processes are fixed for the short run mean while quantity of labour, the quantity of
capital, and production processes are all variable. Next are Fixed costs are already paid
and are unrecoverable for short run and ixed costs have yet to be decided on and paid,
and thus are not truly "fixed.” Lastly, Short run is when the number of firms in an
industry is fixed (even though firms can "shut down" and produce a quantity of zero)
and then for the long run the number of firms in an industry is variable since firms can
enter and exit the marketplace.
 QUESTION 2

a. Complete the table below.

Total TVC TFC TC AVC AFC ATC MC MR

Prod (RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM)
(kg/acre)

200 65.80 110 175.8 0.55 0.33 0.88 xxx xxx

250 77.00 110 187.0 0.44 0.31 0.75 0.22 0.58

300 80.68 110 190.68 0.37 0.27 0.64 0.07 0.58

350 87.59 110 197.59 0.31 0.25 0.57 0.14 0.58

400 94.94 110 204.94 0.28 0.24 0.51 0.15 0.58

450 103.80 110 213.80 0.24 0.23 0.46 0.18 0.58

500 115.30 110 225.3 0.22 0.23 0.45 0.23 0.58

550 133.30 110 243.3 0.20 0.24 0.44 0.36 0.58

600 155.55 110 265.55 0.18 0.26 0.44 0.45 0.58

650 182.80 110 292.80 0.17 0.28 0.45 0.55 0.58

700 215.55 110 325.55 0.16 0.31 0.47 0.66 0.58

750 254.30 110 364.30 0.15 0.34 0.49 0.78 0.58

b. What is the most profitable paddy yield if the price of paddy is 80 cents per kg? What is the
amount of profit or loss per acre?
(RM750×RM0.80) - RM364.30 = RM23570 Profit

c. If the price of paddy fall to 58 cents per kg, should we produce any paddy? If YES, indicate
the profit maximizing yield level per acre we have to produce.
(RM650×RM0.58) - RM292.80 = RM84.20 Profit

Yes, because it will gain a profit.

d. How much would we lose per acre if we did not produce any paddy at some years?
RM110

e. If the expected price of paddy is only 40 cents per kg, should we try to produce anything? If
we do produce, how much kg per acre should we produce?
(RM550×RM0.40)-RM243.30 =-RM23.30 LOSS

If we produce we will get 550kg/acre