You are given the following information about the Bradford paperclip factory\'ss

Question

You are given the following information about the Bradford paperclip factory'sshort-run costs.

a)Given the table above, the average total cost of producing 4 units is ?

b)The marginal cost of producing unit 6 is ?   

c)The marginal cost of producing unit 3 is ?

d)the average total cost of producing 3 units. This means that producing unit 3 causes the average total cost to deacrease or increase?   

Quantity Total Fixed Cost Total Variable Cost Total Cost 0 12 0 12 1 12 2 14 2 12 5 17 3 12 9 21 4 12 16 28 5 12 20 32 6 12 27 39

Explanation / Answer

a) the average total cost of producing 4 units is = total cost of producing 4 unit is / number of units =28/4 = 7.

b) the marginal cost of producing unit 6 is = change in total cost / change in out put = ( 39-32)/(6-5) =7

c) the marginal cost of producing unit 3 is = (21-17)/(3-2) =4

d) the average cost of producing 3 units is = 21/3 =7

The average total cost decreases because the marginal cost at unit 3 = 4 is below , the average total cost at unit 3 is 7 hence Average total cost decreases .

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