A firm has a fixed cost of $100 and average variable cost of $5xq, where q...

A firm has a fixed cost of $100 and average variable cost of $5xq, where q is the number of units produced.

a. Construct a table showing total cost for q from 0 to 10.

b. Graph the firms marginal cost and average total cost curves.

c. How does marginal cost change with q? What does this suggest about the firm’s production process?

Solutions

Expert Solution

TC=FC+VC

ATC=TC/Q

MC=TCn-TCn-1

As it can be seen in the diagram that MC curve is horizontal line and it is not changing with the change in the output level.

This shows that this is constant cost industry firm. It means with the increase in the production marginal cost remains same.

Rahul Sunny answered 1 year ago

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