No. of Products Total Variable Costs, $ Total Costs $ Average Fixed Cost $ Average Variable...

No. of Products	Total Variable Costs, $	Total Costs $	Average Fixed Cost $	Average Variable Cost $	Average Total Cost $	Marginal Cost$
0	0
1	12
2	20
3	24
4	27
5	40
6	65
7	98

Assume that the fixed cost is $80, calculate the above costs in the table and explain the difference between average total costs and marginal costs.
In a graph illustrate the Average Total Cost and Marginal Cost Curves, explain their relationship.
Assume marginal revenue is $ 25 (constant at any quantity). Determine the profit maximizing output and calculate the profit.
Examine why a firm could decide to produce at a loss on a short run.

Expert Solution

Difference Between ATC and MC :

Average total costs measures the average costs of producing some quantity of output.

Marginal Cost is the additional cost of producing one more unit of output. So it is not the cost per unit of all units being produced, but only the next one (or next few). Marginal cost can be calculated by taking the change in total cost and dividing it by the change in quantity.

Relationship between ATC and MC :

When ATC falls with increase in output, MC is lower than ATC, i.e., MC curve lies below the ATC curve. However, it is not necessary that MC should fall throughout this stage. MC rises earlier than ATC.
When ATC rises with increase in output, MC is higher than ATC, i.e., MC curve lies above the AC curve.
MC intersects ATC at its minimum point. Both are U-shaped curves on account of the operation of the law of variable proportions.

When MR = $25 the profit maximizing output is 6 because profit is maximized when MR = MC = 25. Marginal Cost of $25 is achived at output of 6

A firm might operate at loss on a short run because If the firm can cover their variable costs in the short run, then they can start to pay down some of their fixed costs by producing. If they shut down they must pay all of their fixed costs. If the firm can cover the variable costs they can use any excess revenue towards paying their fixed costs, which is a better outcome than shutting down in the short run.

Rahul Sunny answered 2 years ago

Quantity Total Cost Total Fixed Cost Total Variable Cost Average Fixed Cost Average Total Cost Average...

Quantity Total Cost Total Fixed Cost Total Variable Cost Average Fixed Cost Average Total Cost Average Variable Cost Marginal Cost 0 30 1 75 2 150 3 255 4 380 5 525 6 680 7 840 8 1010 9 1200 Given the quantity and total cost, calculate for total fixed cost, total variable cost, average fixed cost, average total cost, average variable cost, and marginal cost. Excel formulas would be nice but not required.

quantity of broomsticks fixed cost variable cost total cost average fixed cost average variable cost average...

quantity of broomsticks fixed cost variable cost total cost average fixed cost average variable cost average total cost marginal cost marginal product 0 10 $13 $38 22 $28 32 $70 41 $64 50 $110 59 $108 65 $133 70 $185 how do I fill in the blanks? as well as graph the three average cost curves and the marginal cost curve.

Labor Q Total Fixed Cost Total Variable Cost Total Cost Marginal Cost Average Fixed Cost Average...

Labor Q Total Fixed Cost Total Variable Cost Total Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost 0 0 25 0 1 4 25 25 2 10 25 50 3 13 25 75 4 15 25 100 5 16 25 125 (a) Complete the blank columns. (b) Assume the price of this product equals $10. What’s the profit-maximizing output (q)? Note: managers maximize profits by setting MR=MC and under perfectly competitive markets, MR=Price. Thus, maximize profit...

From the following information on costs of production, calculate Total Fixed Cost, Total Variable Cost, Average...

From the following information on costs of production, calculate Total Fixed Cost, Total Variable Cost, Average Variable Cost, and Marginal Cost. I also need to graph the total cost curves as well as the average and marginal cost curves. TC = TFC + TVC so for Q=1 TC=30, assume TFC=20 so TVC=10 (20+10=30); continue with logic about FC, it is independent of output, so it would be an incremental 20 with each additional level of output, TVC for each Q...

Jim runs a nursery. Identify the following costs he faces as fixed costs, average fixed costs, variable costs, average variable costs, total costs, average total costs, or marginal costs:

Jim runs a nursery. Identify the following costs he faces as fixed costs, average fixed costs, variable costs, average variable costs, total costs, average total costs, or marginal costs:a) The rent he pays on his greenhouse in the short runb) The rent he pays on his greenhouse in the long runc) the cost of soil, water, and seeds in the short rund) the per-unit cost of producing a nursery plant in the short rune) the opportunity cost of shutting the...

a) Find ABC’s average fixed costs, average variable costs, average total costs and marginal costs.

Quantity Total Fixed Cost Total Variable Cost 0 100 0 1 100 50 2 100 70 3 100 90 4 100 140 5 100 200 6 100 360 a) Find ABC’s average fixed costs, average variable costs, average total costs and marginal costs. b) Since ABC is charging the customers at the price of $50, it seems that the company cannot make a profit. The owner decides to shut down operations. What are ABC’s profits/losses? Should the owner shut down...

Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost Fixed Costs ATC Average Fixed Costs Average...

Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost Fixed Costs ATC Average Fixed Costs Average Variable Costs 0 0 - 10 - 10 - - - 1 8 24 14 24 2 16 34 10 17 3 24 42 8 14 4 32 49 7 12.25 5 40 57 8 11.4 6 48 67 10 11.17 7 56 81 14 11.57 8 64 99 18 12.38 9 72 123 24 13.67 1b. At a price of $14, what is...

Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the variable input (which

Problem TwoUsing the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the variable input (which is labor in this example) is not $50 but $55. I have created Table 2 for you to put your answers in. Assume that fixed costs remain at $220. When the price of a variable input changes which...

1) What is the fixed cost, marginal cost, average total cost, average variable cost and average...

1) What is the fixed cost, marginal cost, average total cost, average variable cost and average fixed cost of the following cost function? . 2) What is the level of output that minimizes AVC? (in other words, what is the level of output that corresponds to the minimum of AVC?)

If a firm has a total fixed cost of $75 and an average variable cost of...

If a firm has a total fixed cost of $75 and an average variable cost of $35 for producing 10 units of output, the average total cost would be: If a firm has an average total cost of $55 and an average fixed cost of $10 for producing 5 units of output, then the total variable cost will be:

Question