Question

In: Economics

What is the average total cost when producing three units?

Use your knowledge of cost functions to calculate the missed cost data in the accompanying table.

Round your answers to two digits after the decimal.

QuantityMarginal CostFixed CostVariable CostTotal CostAverage Fixed CostAverage Variable CostAverage Total Cost
0






1




$40.00
2

$68.00



3$105.00




???
4
$20.00
$400.00


What is the average total cost when producing three units?

Solutions

Expert Solution

Q MC FC VC TC AFC AVC ATC
0 - 20 - 20 - - -
1 40 20 40 60 20 40 60
2 28 20 68 88 10 34 44
3 105 20 173 193 6.66 57.66 64.33
4 207 20 380 400 5 95 100

Using the formulas:

FC (0) = FC(n) = 20 i.e. Fixed cost is the same at all units of output

TC = FC + VC

MC = TC(n) - TC(n-1)

AFC = FC/Q

AVC = VC/Q

ATC = TC/Q

The average total cost (ATC) of producing 3 units of output = $64.33

Ans. 64.33

Rahul Sunny answered 2 years ago
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