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Liberty University *

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Economics

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Feb 20, 2024

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o o (1 o In a slow year, Deutsche Burgers will produce 3.5 million hamburgers at a total cost of $4.6 million. In a good year, it can produce 4.3 million hamburgers at a total cost of $4.9 million. . What are the fixed costs of hamburger production? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. . What is the variable cost per hamburger? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. . What is the average cost per burger when the firm produces 2 million hamburgers? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. . What is the average cost per burger when the firm produces 3 million hamburgers? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. . Why is the average cost lower when more burgers are produced? 5 s 2 1% sase a. Fixed cost 3.288 million i $ 2% b. Variable cost 0.38 per burger $ ./002 3 c. Average cost 202 per burger d. Average cost 1$ 47’ 0.02|per burger e. Why is the average cost lower when more burgers e fixed costs are spread across more are produced? burgers. Explanation: Some values below may be shown as rounded for display purposes, though unrounded numbers should be used for actual calculations. The extra 0.8 million burgers increase total costs by $0.3 million. Therefore, variable cost = $0.3 million + 0.8 million burgers or $0.38 per burger. $4.6 million = (3.5 million burgers x $0.38) + Fixed costs Fixed costs = $3.288 million . Fixed costs = $3.288 million . Variable costs = $0.38 per burger Total cost = (2 million burgers x $0.38) + $3.288 million = $4.037 million Average cost = $4.037 million + 2 million burgers = $2.02 per burger . Total cost = (3 million burgers x $0.38) + $3.288 million = $4.413 million Average cost = $4.413 million + 3 million burgers = $1.47 per burger The fixed costs are spread across more burgers. Thus, the average cost falls.

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