Question

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.

Quantity	Marginal Cost	Fixed Cost	Variable Cost	Total Cost	Average Fixed Cost	Average Variable Cost	Average 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?

Answer 1

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