Question

Refer to the table below.

Quantity	Variable Cost (in dollars)	Fixed Costs (in dollars)	Total Costs (in dollars)	Average Variable Costs (in dollars per unit)	Average Total Costs (in dollars per unit)	Marginal Costs (in dollars per unit)
0	0	A	40	--	--	--
1	15	40	55	15	55	15
2	35	40	75	17.5	37.5	20
3	60	40	100	20	33.3	25
4	90	40	130	22.5	32.5	30
5	125	40	165	C	33	35
6	B	40	D	26.6	33.3	35

1. Find the missing value A, B, C, D

2. Continue to refer to this table. If the firm produces 5 units that it sells for $40.00 each, what will its profits or losses equal?

Select one:

a. losses equal $75

b. losses equal $35

c. profits equal $75

d. profits equal $35

3. Continue to refer to this table. If the company sells 4 units at a price of $25 each, then the marginal unit produced

Select one:

a. is reducing profits.

b. costs the same as the average cost.

c. is increasing to profits.

d. costs more than the average total costs.

Answer 1

1)A=Total fixed coat=49

B=Total variable cost=Total variable cost previous unit+ marginal cost of this unit=125+35=160

C=Average variable cost=Total variable cost/Q=125/5=25

D=Total cost=Total variable cost+ total fixed cost125+40=165

2) Profit= (P- average total cost)*Q

Profit=(40-33)*5=7*5=35

3) Marginal cost will cost 35$( 5 th unit)

But it only give 25$ ( price of good)

So as result marginal product will give profit=25-35=-10$

It will decrease profit by 10$.

Option A is right