Question

In: Economics

Production cost, fixed cost, average variable cost, product output

Use the following data table to answer questions a,b,c,d, and d. Answer the next question(s) on the basis of the following cost data for a purely competitive seller:

a. what are the above data for?

b.How much are average fixed cost, average variable cost, and average total cost at 5 units of output?

c. How much is the marginal cost of the fifth unit of output?

d. How many products will the firm produce if the product price is $75?

e. Given the $75 product price, how much will the firm be at its optimal output?

Expert Solution

Marginal-cost pricing is the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. Marginal cost refers to the additional cost to produce a unit product.

Marginal cost = Change in production cost / Change in quantity

Total variable cost = Cost per unit x Total number of units

a. The data above is used to be important information for the business, namely about how much the company will spend for every few or 1 additional unit of product to be produced.

b. AVC = TVC / Q

= 300 / 5

= 6

AFC = TFC / Q

= 50 / 5

= 10

ATC = TC / Q

= 350 / 5

= 7

c. MC = TC / Q

= (270 – 200) / (4 – 3)

= 70

Q	P	TC	TR
1	75	120	75
2	75	170	150
3	75	200	225
4	75	270	300
5	75	350	375
6	75	440	450

d. If the product price is 75, then the company can produce at least 3 units of the product to make a profit.

Q	P	TC	MC	TR	MR
0	75	50	0	0	0
1	75	120	70	75	75
2	75	170	50	150	75
3	75	200	30	225	75
4	75	270	70	300	75
5	75	350	80	375	75
6	75	440	90	450	75

e. There is no optimal output because there is no condition where Marginal Cost = Price.

Cinnamon answered 2 years ago

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