Question
In: Economics
7. Various measures of cost Douglas Fur is a small manufacturer of fake-fur boots in Chicago....
7. Various measures of cost
Douglas Fur is a small manufacturer of fake-fur boots in Chicago. The following table shows the company's total cost of production at various production quantities.
Fill in the remaining cells of the table.
|
Quantity |
Total Cost |
Marginal Cost |
Fixed Cost |
Variable Cost |
Average Variable Cost |
Average Total Cost |
|---|---|---|---|---|---|---|
|
(Pairs) |
(Dollars) |
(Dollars) |
(Dollars) |
(Dollars) |
(Dollars per pair) |
(Dollars per pair) |
| 0 | 120 | — | — | |||
| 1 | 210 | |||||
| 2 | 270 | |||||
| 3 | 315 | |||||
| 4 | 380 | |||||
| 5 | 475 | |||||
| 6 | 630 | |||||
On the following graph, plot Douglas Fur’s average total cost curve (ATCATC) using the green points (triangle symbol). Next, plot its average variable cost curve (AVCAVC) using the purple points (diamond symbol). Finally, plot its marginal cost curve (MCMC) using the orange points (square symbol).
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
ATCAVCMC01234562402101801501209060300COSTS (Dollars per pair)QUANTITY OF OUTPUT (Pairs of boots)
Solutions
Expert Solution
The left hand side table shows the calculated values, whereas the right hand side table shows the formula view of the calculations. When quantity is zero, variable cost is zero and hence all the costs are fixed cost. Therefore, foxed cost = $120, which has been populated in column D throughout.
Marginal cost is the cost per additional unit of output as calculated in column C.
Variable cost is the difference between the total cost and the fixed cost (column (E).
Average variable cost = variable cost / Quantity of output (Column F)
Average total cost = Total cost / Quantity of output (Column G)
The average cost curve, average variable cost curve and the marginal cost curve can be drawn as follows:
Rahul Sunny answered 1 year agoRelated Solutions
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