Karen runs a print shop that makes posters for large companies. It is a very competitive...

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Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is curren

What the prints 2.000 posters? What if she prints 10.000 posters? 1. What is het ATC per poster she prints 10007 < P 4 20 Nex

Return b. What is her ATC per poster she prints 1,000? What if she prints 2.000? What the prints 10.000? < Prex of 20 II Next

business economics

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Answer 1

Answer #1

a. AFC (average fixed cost ) = fixed cost/output produced.

Fixed cost is the same for all the units produced.

Hence, Average fixed cost keeps falling as we increase the number of units produced.

Fixed cost = $500

- AFC (at 1000 posters ) = 500/1000

= $0.5

- AFC (at 2000 posters ) = 500/2000

=$0.25

- AFC (at 10000 posters) = 500/10000

=$0.05

b.ATC(average total cost ) = Average fixed cost (AFC) + Average variable cost (AVC)

AVC = Variable Cost/ output produced

- AFC (at 1000)= $0.5 (calculated above)

Variable cost for 1000 posters = $1000

AVC (at 1000) = 1000/1000 = $1

ATC = AFC + AVC = $0.5 + $1

= $1.5

- AFC (at 2000) = $0.25 (calc above)

Variable Cost = $1000 for first 1000 posters

= $800 for next 1000 posters

= $750 for each additional thousand.

Variable Cost (at 2000) = 1000+800 = 1800

AVC (at 2000) = 1800/2000 = $0.9

ATC = AFC + AVC = 0.25 + 0.9

= $1.15

- AFC (at 10000) = $0.05 (calc above)

Variable Cost (at 10000) = 1000 + 800 + 750*8(remaining thousand units) = $7800

AVC (at 10000) = 7800/10000 = $0.78

ATC (at 10000) = AFC + AVC = 0.05 + 0.78

= $0.83

Let me know if you have any doubts :)

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Answer 2

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