Question

2. Complete the following cost schedule. Round to two decimal places. Answer the questions below
    after completing the table.

Rate of Output	Total Cost	Marginal Cost	Average Fixed Cost	Average Variable Cost	Average Total Cost
0	$1000
1	1200
2	1450
3	1750
4	2100
5	2500

a. Use the cost data above to graph the ATC and MC curves.
b. At what output rate is ATC minimized?

Answer 1

MC(n)=(TC(n)-TC(p))/(n-p)
MC(n)=marginal cost of n th unit
TC(n)=Total cost of n units of output
TC(p)=Total cost of p unit of output
here, n>p.

MC(1)=(1200-1000)/(1-0)=$200

MC(2)=(1450-1200)/(2-1)=250 and so on

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FC=the cost is same at all level, and it is equal to the total cost at Q=0

FC=$1000

AFC=FC/Q

AFC(1)=1000/1=$1000

AFC(2)=1000/2=500 and so on

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VC=TC-FC

AVC=VC/Q=(TC-FC)/Q

AVC(1)=(1200-1000)/1=200

AVC(2)=(1450-1000)/2=225 and so on

ATC=AFC+AVC

ATC(1)=1000+200=1200

ATC(2)=500+225=725 and so on

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Output	TC	MC	AFC	AVC	ATC
0	1000
1	1200	200.00	1000.00	200.00	1200.00
2	1450	250.00	500.00	225.00	725.00
3	1750	300.00	333.33	250.00	583.33
4	2100	350.00	250.00	275.00	525.00
5	2500	400.00	200.00	300.00	500.00

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a)

b)

From the table, the ATC is minimum at five units of output where ATC=$500.

It is efficient or minimum where ATC=MC but the ATC >MC at all level provided, so the efficient output level is at a higher level of output than given.