Question

MICROECONOMIC PRINCIPLES Dr. Charles Briggs OUT OF CLASS WORK NAME 1. Define or find the meanings of the following terms and they are calculated: Fixed cost Variable cost, Total cost Average fixed cost, Total fixed cost, Marginal cost, Average variable cost, Average total cost, Total revenue, Marginal revenue, Explicit cost, Implicit cost. Marcia Deal is considering giving up her cake baking and decorating business to begin a daycare center in her home The table below gives the total cost of providing 8 hours of care per day from through 5 children. 2. Complete the cost table below and draw graphs to represent each cost calculated NOTE: ALL GRAPHS MUST BE DRAWN ON ONE GRID. PLACE COST ON THE VERTICAL AXIS AND QUANTITY ON THE HORIJONTAL AXIS. Number of Children Total Cost Total Fixed | Cost Total Variable Cost Average Variable Cost Average Fixed COS Average Total Cost Marginal Cost 0 SIS 40 48 68 90

Answer 1

1.

Fixed Cost: This is the cost that does not vary with the level of output produced. eg. rent.

Variable Cost: These costs vary with the level of output produced. eg. labor.

Total Cost: This is the sum of fixed and variable costs.

Average Fixed Cost: This is the fixed cost per unit of output produced. Since fixed cost is fixed, average fixed cost decreases with increase in output.