1. The accompanying table shows a car manufacturer’s total cost of producing car
ID: 1217854 • Letter: 1
Question
1. The accompanying table shows a car manufacturer’s total cost of producing cars. Quantity of cars Total Cost 0 $500,000 1 $540,000 2 $560,000 3 $570,000 4 $590,000 5 $620,000 6 $660,000 7 $720,000 8 $800,000 9 $920,000 10 $1,100,000 a. What is this manufacturer’s fixed cost? b. For each level of output except zero output, calculate this manufacturer’s marginal cost (MC). c. For each level of output except zero output, calculate the variable cost (VC). d. For each level of output except zero output, calculate the average variable cost (AVC), e. For each level of output, calculate the average total cost (ATC),
Explanation / Answer
a. FC = $500,000. Since at Q= 0, TC is $500,000 and VC = 0, it means FC = $500,000
Q TC($) FC($) MC($) VC($)= TC-FC AVC($)= VC/Q ATC($)=TC/Q 0 500,000 500,000 - 0 0 0 1 540,000 500,000 40,000 40000 40,000 540,000 2 560,000 500,000 20,000 60,000 30,000 280,000 3 570,000 500,000 10,000 70,000 23,333.33 190,000 4 590,000 500,000 20,000 90,000 22500 147,500 5 620,000 500,000 30,000 120,000 24000 124,000 6 660,000 500,000 40,000 160,000 26666.67 110,000 7 720,000 500,000 60,000 220,000 31428.57 102,857.14 8 800,000 500,000 80,000 300,000 37500 100,000 9 920,000 500,000 120,000 420,000 46,666.67 102,222.22 10 1,100,000 500,000 180,000 600,000 60,000 110,000Related Questions
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