Question

In: Economics

5) The following table describes the costs of production for a firm. Quantity 0 1 2...

5)

The following table describes the costs of production for a firm.

Quantity 0 1 2 3 4 5 6
Total Cost ? ? 2800 3400 4200 5200 6400
Average Variable Cost - ? 900 800 800 840 900

What is the average fixed cost of producing 4 units?

Group of answer choices

a 250

b None of these answers

c 1000

d 200

e 1250

6)

Suppose a firm has the following costs:

Quantity 0 1 2 3 4 5 6
Total Cost 200 250 280 320 400 500 620

What is the average fixed cost at a quantity of 5 units?

Group of answer choices

a 200

b 40

c 100

d 60

e 300

Solutions

Expert Solution

Q5)

answer-option a . $250

Fixed cost is the cost incurred on the use of fixed factors of production. It is independent of the output produced and remains constant at all levels of output. As total fixed costs remain the same at each level of output, total fixed costs can be calculated as-

We know, Total cost= Total fixed costs + total variable cost

Hence,

Total fixed costs= Total cost - Total Variable cost

From the given table we can see that at 4 units of output, average variable cost is $800 and total cost is $4,200. Hence,

Total variable cost= average variable cost x quantity

Total variable cost= $800 x 4

Total Variable cost= $3,200

So,

Total fixed cost= total cost - total variable cost

Total fixed cost= $4,200 - $3,200

Total fixed cost =$1,000

Average fixed cost is fixed cost per unit of output. It is calculated as-

Average fixed cost= total fixed cost / quantity

At 4 units of output, total fixed costs are $1,000. Hence,

Average fixed cost= $1,000/4

Average fixed costs= $250( answer)

Hence, average fixed cost of producing 4 units is $250.

Q6).

answer-option b. $40

Fixed cost are the costs incurred on the use of fixed factors of production. Even if nothing is produced, fixed costs are to be incurred. Hence, when zero output is produced, total cost is equal to total fixed costs.

From the given table we can see that at output of zero (0) units, total cost = $200

Hence, total fixed costs= $200

As fixed costs are independent of the output produced and remains the same at each level of output, total fixed costs when 5 units are produced is $200.

Average fixed cost is fixed cost per unit of output. It is calculated as-

Average fixed cost= Total fixed cost / quantity

Average fixed cost= $200/5

Average fixed cost= $40

Hence, average fixed cost at a quantity of 5 units is $40 ( answer).

Rahul Sunny answered 2 years ago
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