Question

Short-run cost formulas

Douglas Fur is a small manufacturer of fake-fur boots in Detroit. The following table shows the company's total cost of production at various production quantities.

Fill in the remaining cells of the table.

Total Product	Total Cost	Marginal Cost	Total Fixed Cost	Total 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). (Hint: For ATCATC and AVCAVC, plot the points on the integer: For example, the average total cost of producing one pair of boots is $210, so you should start your average total cost curve by placing a green point at (1, 210). For marginal cost, plot the points between the integers: For example, the marginal cost of increasing production from zero to one pair of boots is $90, so you should start your marginal cost curve by placing an orange square at (0.5, 90).)

Answer 1

Working notes:

• TFC = $120 (since FC is value of TC when Q = 0)
• TVC = TC - TFC
• MC = Change in TC / Change in Q
• AFC = TFC/Q
• AVC = TVC/Q
• ATC = TC/Q

Filled in data table:

Q	TC	MC	TFC	TVC	AVC	ATC
0	120		120
1	210	90	120	90	90	210
2	270	60	120	150	75	135
3	315	45	120	195	65	105
4	380	65	120	260	65	95
5	475	95	120	355	71	95
6	630	155	120	510	85	105

Graph: