Question

Use your knowledge of cost functions to calculate the missed cost data in the accompanying table. Round your answers to two digits after the decimal Marginal Fixed Variable Total Average fixed Average Average total Quantity cost Cost cost cost Cost variable cost cost 1 $45.00 2 $74.00 $105.00 $20.00 $400.00 What is the total cost when producing zero units? total cost: $ What is the marginal cost for the first unit? marginal cost: S What is the average total cost when producing three units? average tolal cost: $ What is the average variable cost when producing four units?

Answer 1

Q 1) We use the following formula to complete the table given in the question,

Marginal cost = Total cost of nth unit - Total cost of (n-1)th unit

Total cost = Fixed cost + Variable cost

Average fixed cost = Total fixed cost / quantity produced

Average variable cost = Total variable cost / quantity produced

Average total cost = Total cost / quantity produced

Average total cost = Average variable cost + Average fixed cost

Since, fixed cost remains the same for all the levels of output, fixed cost in this case is 20 for every level of output.

QUANTITY	MARGINAL COST	FIXED COST	VARIABLE COST	TOTAL COST	AVERAGE FIXED COST	AVERAGE VARIABLE COST	AVERAGE TOTAL COST
0	-	20	0	20	-	-	-
1	45	20	45	65	20	45	65
2	29	20	74	94	10	37	47
3	105	20	179	199	6.66	59.66	66.33
4	201	20	380	400	5	95	100

Total cost when producing 0 units is 20 as there is only fixed cost. Variable cost changes with the level of output. Since, 0 level of output is produced, there is no variable cost.

Marginal cost for the first unit = 65 - 20 = 45

Average total cost when producing 3 units is 66.33 that is 199 / 3 = 66.33

Average variable cost when producing 4 units is 95 that is 380 / 4 = 95