Answered: 3. A firm has a total fixed cost of $60…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. A firm has a total fixed cost of $60 and total variable costs as

indicated in the table. Complete the table and check your cal-

culations by referring to problem 4 at the end of Chapter 10.

L09.3

Graph total fixed cost, total variable cost, and total cost.

Explain how the law of diminishing returns influences the

shapes of the variable-cost and total-cost curves.

Graph AFC, AVC, ATC, and MC. Explain the derivation

and shape of each of these four curves and their relation-

ships to one another. Specifically, explain in nontechnical

terms why the MC curve intersects both the AVC and the

ATC curves at their minimum points.

C. Explain how the location of each curve graphed in question

3b.

would be altered if (1) total fixed cost is $100 rather than

$60 and (2) total variable cost is $10 less at each level of

output.

CulatioIIS Uy 1CICITIII: to pro UIOI
n
she took time off from a job that paid her $20 per hour. Linda's
accounting profit is
L09.3
while her economic profit
a. Graph total fixed cost, total variable cost, and total cost.
Explain how the law of diminishing returns influences the
shapes of the variable-cost and total-cost curves.
b. Graph AFC, AVC, ATC, and MC. Explain the derivation
and shape of each of these four curves and their relation-
ships to one another. Specifically, explain in nontechnical
terms why the MC curve intersects both the AVC and the
ATC curves at their minimum points.
c. Explain how the location of each curve graphed in question
3b would be altered if (1) total fixed cost is $100 rather than
$60 and (2) total variable cost is $10 less at each level of
LO94
$700; $4001
b. $300, $100
C. $300; negative $100
00, negativei,100
ch of the following are shTOarun
dwhich are
long
adjustments! LO9.1
1new restaurant
Devidson Corporation hires 200 more production
brn crop.
plant adds a third shift of Workers.
CLLT
output.
An Alcon a
Total
Total
Total
Total
Average
Average
Average
Marginal
Product
Fixed Cost
Variable Cost
Cost
Fixed Cost
Variable Cost
Total Cost
Cost
$
$ 0
$-
$.
1
45
$4
2
85
3
120
150
185
225
7
270
8.
325
9.
390
10
465
ng-run average-cost

Expert Solution

Step 1

Total fixed cost is the cost that does not change as the level of output changes. For example, depreciation, rent, salaries, insurance, and so on. Total variable cost is the cost that varies with the level of output. For example, piece labour rates, outbound freight charges, raw material costs, electricity, and so on.The sum of all fixed and variable costs is known as total cost. Total variable cost is the sum of all variable costs related to the cost of goods sold in a reporting period. Total fixed costs are the sum of all a company's consistent, non-variable expenses.

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