Question

In: Economics

Each of the following situations describes a firm’s production and costs during a given year. a....

Each of the following situations describes a firm’s production and costs during a given year. a. Firm A is producing 20 000 units of output, incurring a total cost of $1,000,000 and total variable cost of $600,000. What is Firm A’s average fixed cost? b. Firm B is producing 20,000 units of output, incurring a total cost of $100,000 and total fixed cost of $20,000. What is Firm B’s average variable cost? c. Firm C is producing 750 units of output. Average variable cost is $10 per unit and average fixed cost is $5 per unit. What is Firm C’s total cost? d. Firm D is producing 400 units of output. Average total cost is $12 and average fixed cost is $4. What is Firm D’s total variable cost? e. Firm E is producing 1,250,000 units of output, incurring a total cost of $20,000,000 and total variable cost of $18,000,000. What is Firm E’s average fixed cost?

Solutions

Expert Solution

1 - Average fixed cost = TFC / Output

= 400000/20000

= $ 20

2 - Average variable cost = 80000/20000

= $4

3 -

TFC = 750*5

= 3750

TVC = 750*10

= 7500

Total cost = 3750+7500

= $ 11250

4 - Total fixed cost = $ 2000000

Output = 1250000

Average fixed cost = 2000000/1250000

= $ 1.6

Rahul Sunny answered 2 years ago
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