Question

Jane's Juice Bar has the following cost schedules:

In the following table, complete the marginal cost, average variable cost, and average total cost columns.

Quantity	Variable Cost	Total Cost	Marginal Cost	Average Variable Cost	Average Total Cost
(Vats of juice)	(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)
0	0	30
1	8	38
2	18	48
3	30	60
4	50	80
5	80	110
6	120	150

On the following graph, use the orange points (square symbol) to plot the marginal-cost curve for Jane's Juice Bar. (Note: Be sure to plot from left to right and to plot between integers. For example, if the marginal cost of increasing production from 1 vat of juice to 2 vats of juice is $5, then you would plot a point at (1.5, 5).) Then use the purple points (diamond symbol) to plot the average-variable cost curve starting at 1 vat of juice, and use the green points (triangle symbol) to plot the average-total-cost curve also starting at 1 vat of juice.

Marginal CostAverage Variable CostAverage Total Cost01234564035302520151050CostsQuantity (Vats of juice)6, 25

Which of the following statements are true according to the previous graph? Check all that apply.

The marginal-cost curve is below the average-total-cost curve when output is less than four and average total cost is declining.

The marginal-cost curve is below the average-total-cost curve when output is greater than four and average total cost is rising.

The marginal-cost curve lies above the average-variable-cost curve.

Answer 1

Q	VC	TC	MC=Change in TC	AVC=VC/Q	ATC=TC/Q
0	0	30	-	-	-
1	8	38	8	8	38
2	18	48	10	9	24
3	30	60	12	10	20
4	50	80	20	12.5	20
5	80	110	30	16	22
6	120	150	40	20	25

By plotting AVC, ATC and MC , we get the graph as shown below:

MC curve is below ATC when Q is less than 4 units and ATC is declining.

MC curve is above ATC when Q is greater than 4 and ATC is rising.

MC curve lies above AVC at all levels of output .

Hence, option(A) and (C) are correct.