(a) Complete the following cost schedule by computing average fixed cost and ave

Question

(a) Complete the following cost schedule by computing average fixed cost and average variable cost. Instructions: Enter your responses rounded to the nearest whole number. Output Total Cost Average Fixed Cost Average Variable Cost 0 $600 ----- ----- 1 800 2 1,050 3 1,400 4 1,800 5 2,300 (b) Complete the following cost schedule by computing average total cost and marginal cost. Instructions: Enter your responses rounded to the nearest whole number. Output Total Cost Marginal Cost Average Total Cost 0 $600 ----- ----- 1 800 2 1,050 3 1,400 4 1,800 5 2,300 (c) At what output rate is average total cost minimized? Instructions: Enter your response as a whole number. units

Explanation / Answer

(a)

As you see total cost for 0 unit of production is 600, so we can say that fixed cost of production is 600.

Average Fixed Cost = Total Fixed Cost divided by quantity

Average Variable Cost = Total Variable Cost divided by quantity

(b)

Marginal Cost = Change in total cost divided by change in output

Average Total Cost = Total cost divided by output

(c) At 4 unit of output average total cost is minimized.

Output Total Cost($) Average Fixed Cost($) Average Variable Cost($) 0 600 - - 1 800 600 200 2 1050 300 225 3 1400 200 267 4 1800 150 300 5 2300 120 340

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