a. The production and total cost levels in the short run for a firm are Q (0,1,2
ID: 1190760 • Letter: A
Question
a. The production and total cost levels in the short run for a firm are
Q (0,1,2,3,4,5) TC (-,-,-,24,25,28) TFC (-,-,-,15,-,-) TVC (-,4,3,-,-,-) AFC (-,-,-,-,-) ATC (-,-,-,-,-) AVC (-,-,-,-,-) MC (-,-,-,-,-) Complete the table. Explain how you calculate these values.
b. A firm is currently producing 50 units of output. At this level of output produced, its average fixed cost is 90 (AFC = 90) and average variable cost is 140 (AVC = 140)
1.What is this firm’s total cost of producing 50 units of output?
2. If the average variable cost of producing 60 units of output is 130, what is the total cost of producing these 60 units of output?
3.If this firm increases output from 50 to 60, how much is marginal cost?
Explanation / Answer
1.
At Q = 50,
AFC = 90
So, FC = AFC×Q = 90×50 = 4500
AVC = 140
Therefore, ATC = AVC+AFC = 140+90 = 230
TC = ATC×Q = 230×50 = $11,500
2.
At Q = 60,
AVC = 130
So, TVC = AVC×Q = 130×60 = 7800
FC = 4500 (from part 1)
Therefore, TC = TVC+TFC = 7800+4500 = $12,300
3.
MC = [TC(60) – TC(50)]/(60-50)
MC = [12,300 – 11,500)]/(10)
MC = $80
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