# Explain the Law of Diminishing Returns: Introductions to Economics Assignment, SMU, Singapore

 University Singapore Management University (SMU) Subject Economics

Question 1: Diminishing Returns

1. Explain the law of diminishing returns.
2. How does the law of diminishing returns explain the shape of the TP curve?
3. What is the relationship between the AP curve and the MP curve?
4. What is the relationship between the MP curve and the MC curve?

## Question 2:

### 1. Calculation of Cost

• Use the following formulae to complete the table in the next page
• TC = TFC + TVC
• MC = Change in TC/Change in Output
• AFC = TFC/Q
• AVC= TVC/Q
• ATC = TC/Q = AFC + AVC

### 2. Cost Complete the following table

 Q TFC TVC TC MC AFC AVC ATC 0 20 0 – – – – 1 5 2 8 3 13 4 20

## Question 3: Cost Curves

(a) What is the relationship between the average total cost curve, average variable cost curve, and marginal cost curve?
(b) Explain why the short-run average total cost curve is U-shaped.

(c) Explain why the long-run average total cost curve is U-shaped.

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