Output 0 1 2 3 4 5 6 7 8 9 10 Total cost 100 120 140 160 220 300 450 600 1,000 2
ID: 1200781 • Letter: O
Question
Output
0
1
2
3
4
5
6
7
8
9
10
Total cost
100
120
140
160
220
300
450
600
1,000
2,500
5,000
The fixed costs for the firm are:
a) 100
b) 10
C) 5
D) Cannot be calculated at all
2. The average cost of production when 5 items were made is:
a) 55
b) 60
c) 75
d) 86
3. The marginal cost of the 7th unit is:
a) 450
b) 600
c) 400
d) 150
4. The variable cost per unit when 4 units are made is:
a) 20
b) 30
c) 40
d) 58
Output
0
1
2
3
4
5
6
7
8
9
10
Total cost
100
120
140
160
220
300
450
600
1,000
2,500
5,000
Explanation / Answer
1. A is Correct, Fixed Cost of the Firm is 100 i.e at 0 Units. Fixed cost is fixed it is not associated with Production a cost which has already been incurred before production of any unit.
2. Average cost at 5 units will be =TC/No. of units produced=300/5=60, therfore B is correct
3. Marginal cost of 7th Unit is =Total Cost at 7th-Total Cost at 6th=600-450=150 therfore D is correct.
4. Variable Cost at 4 units will be =Total Cost of producing 4 units - Fixed Cost=(220-100)/4=120/4=30 therfore B is Correct.
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