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 variable Average total | cost cost cost cost cost cost cost 0 $50.00 $68.00 2 3 $85.00 $20.00 $360.00 What is the total cost when producing zero units? total cost: $ 40 What is the marginal cost for the first unit? What is the marginal cost for the first unit? marginal cost: $ 30 What is the average total cost when producing three units? average total cost: $ 65.67 What is the average variable cost when producing four units? average variable cost: $

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Answer 1

Ans.

Quantity	Marginal cost	Fixed cost	Variable cost	Total cost	Average fixed cost	Average variable cost	Average total cost
0	---	$20.00	$0.00	$20.00	---	---	---
1	$50.00	$20.00	$50.00	$70.00	$20.00	$50.00	$70.00
2	$18.00	$20.00	$68.00	$88.00	$10.00	$34.00	$44.00
3	$85.00	$20.00	$153.00	$173.00	$6.67	$51.00	$57.67
4	$187.00	$20.00	$340.00	$360.00	$5.00	$85.00	$90.00

Note: 1) TC = sum of MC or VC = sum of MC

2) MC = change in TC/ change in Q or change in VC/ change in Q

3) FC will remain the same at each output level even at zero output level.

4) TC = FC+ VC

5) AFC = FC/Q

6) AVC = VC/Q

7) ATC = TC/Q or ATC = AFC + AVC

8) VC = AVC x Q, when Q = 1, then VC = $50.00 x 1 = $50.00

9) VC = TC - FC

VC = $360.00 - $20.00 = $340.00

A) when Q = 0 unit, then TC = FC = $20.00 because VC = $0.00

Hence, the total cost is $20.00 when producing zero units.

B) when Q = 1 unit, then MC = $50.00

Hence, the marginal cost$50.00 when producing one unit.

  

C) when Q = 3 units, then ATC = $57.67

Hence, the average total cost is $57.67 when producing three units.

D) when Q = 4 units, then AVC = $85.00

Hence, the average variable cost is $85.00 when producing four units.