6. Various measures of cost Aa Aa Douglas Fur (DF) is a small manufacturer of fa

Question

6. Various measures of cost Aa Aa Douglas Fur (DF) is a small manufacturer of fake-fur boots in Chicago. Its total cost of production is given in the following table Fill in the remaining cells of the table Output (Pairs per hour) Total Cost Marginal Cost Total Fixed Total Variable Average Average Total Cost Cost Variable Cost Cost 60 160 220 270 340 450 630 4 6 On the following graph, plot DF's average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). Line segments will automatically connect the points. Remember to plot from left to right. For ATC and AVC, plot the points on the integer: For example, the ATC of producing one pair of boots is $160, so you should start your ATC curve by placing a green triangle at the point (1, 160). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $100, so you should start your MC curve by placing an orange square at the point (0.5, 100) Note: The vertical precision of this graph is set so that you can plot only in increments of five. Some points may require slight rounding in order to plot. For example, to plot 98, round it to 100

Explanation / Answer

105

using the formulas

TC=TFC+TVC

AC= TC/Q

AVC= TVC/Q

AFC=TFC/Q

Output Total cost Marginal cost Total fixed cost Total variable cost Average variable cost Average total cost 0 60 60 0 0 0 1 160 100 60 100 100 160 2 220 60 60 160 80 110 3 270 50 60 210 70 90 4 340 70 60 280 70 85 5 450 110 60 390 78 90 6 630 180 60 570 95

105

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