4. KEY QUESTION Assume the following cost data are for a purely competitive producer: LO3 Total Average Average Average Marginal Product Fixed Cost Variable Cost Total Cost Cost $45 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Average Fixed Cost Average Total Cost Total Total Total Total Average Variable Cost Marginal Product Fixed Cost Variable Cost Cost Cost $ 0 $ $ 45 2 85 3 120 4 150 5 185 6 225 7 270 8 325 390 10 465
A firm has fixed costs of $60 and variable costs as indicated in the table at the bottom of this page. Complete the table and check your calculations by referring to question 4 at the end of Chapter 9.
a. Graph total fixed cost, total variable cost, and total cost. Explain how the law of diminishing returns inflfluences the shapes of the variable-cost and total-cost curves.
b. Graph AFC,
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