Question

1. Suppose that you own a firm that manufactures glass vases. You have one employee, Jonathan, who is the vase maker. You pay Jonathan $40 per hour.

Within a one-week period (which is equivalent to a 40-hour work period), Jonathan takes 6 hours to make the first vase, 4 hours to make the second vase, 2 hours to make the third vase, 3 hours to make the fourth vase, 5 hours to make the fifth vase, 8 hours to make the sixth vase, and 12 hours to make the seventh vase.

Suppose that the weekly rental fee for you firm building is $500.

Please plot the following functions within the same graph. Please make the functions/graph as large, visible, and annotated as possible:

1. Variable cost function (C(Q)^V)
2. Marginal cost function (MC)
3. Average variable cost function (AVC)
4. Fixed cost function (F)
5. Average fixed cost function (AFC)
6. Total cost function (TC)
7. Average total cost function (ATC)

Answer 1

The Marginal Cost schedule is made

Output Cost per unit 240 160 80 120 200 320 480

Marginal Cost = nth unit produced x $ 40

The cost schedule

Output TVC AFC AVC ATC 740 TEC 0 240 400 480 600 800 1120 1600 TC 500 500 500 500 500 500 500 500 M C 500 740 900 980 1100 1300 1620 2100 240 160 80 120 200 320 480 500 250 167 125 100 83 71 240 200 160 150 160 187 229 450 327 275 260 270 300

Total Variable Cost = Cumulative of Marginal Cost

Total Fixed Cost = Rent ($500) , for all outputs

Total Cost (TC) = TVC+TFC

Average Fixed Cost (AFC) = TFC/Output

Average Variable Cost (AVC) = TVC/Output

Average Cost (AC) = AFC+AVC or TC/Output

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