5. Assume the following total cost function.\[\begin{array}{|c|c|}\hline\text{Output} & \text{Total Cost} \\\hline0 & 50 \\1 & 65 \\2 & 85 \\3 & 110 \\4 & 140 \\\hline\end{array}\]What are the average total cost, average variable cost, average fixed cost, and marginal cost of producing 4 units of output?**Explanation:**To analyze the cost function, we identify the components:- **Total Fixed Cost (TFC):** This is the cost when output is zero. In this case, $ TFC = 50 $.- **Total Variable Cost (TVC):** This is calculated by subtracting the TFC from the TC at each level of output.- **Total Cost (TC):** Given in the table for each output level.To compute the various costs for 4 units:1. **Average Total Cost (ATC):** \[ ATC = \frac{TC}{\text{Output}} = \frac{140}{4} = 35 \]2. **Average Variable Cost (AVC):** \[ TVC = TC - TFC = 140 - 50 = 90 \] \[ AVC = \frac{TVC}{\text{Output}} = \frac{90}{4} = 22.5 \]3. **Average Fixed Cost (AFC):** \[ AFC = \frac{TFC}{\text{Output}} = \frac{50}{4} = 12.5 \]4. **Marginal Cost (MC):** The cost of producing one more unit of output. \[ MC = TC_n - TC_{n-1} = 140 - 110 = 30 \]These calculations help understand the cost dynamics at different production levels, essential for decision-making in resource allocation and pricing strategy.

Q=4 TC=140 TFC=50 ∆TC=140-110 =30 ∆Q =4-3 =1

Answered: What are the average total cost,…

What are the average total cost, average variable cost, average fixed cost, and marginal cost of producing 4 units of output?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Problem 1QTC

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Question

5. Assume the following total cost function.

\[
\begin{array}{|c|c|}
\hline
\text{Output} & \text{Total Cost} \\
\hline
0 & 50 \\
1 & 65 \\
2 & 85 \\
3 & 110 \\
4 & 140 \\
\hline
\end{array}
\]

What are the average total cost, average variable cost, average fixed cost, and marginal cost of producing 4 units of output?

**Explanation:**

To analyze the cost function, we identify the components:

- **Total Fixed Cost (TFC):** This is the cost when output is zero. In this case, $ TFC = 50 $.

- **Total Variable Cost (TVC):** This is calculated by subtracting the TFC from the TC at each level of output.

- **Total Cost (TC):** Given in the table for each output level.

To compute the various costs for 4 units:

1. **Average Total Cost (ATC):**
\[
ATC = \frac{TC}{\text{Output}} = \frac{140}{4} = 35
\]

2. **Average Variable Cost (AVC):**
\[
TVC = TC - TFC = 140 - 50 = 90
\]
\[
AVC = \frac{TVC}{\text{Output}} = \frac{90}{4} = 22.5
\]

3. **Average Fixed Cost (AFC):**
\[
AFC = \frac{TFC}{\text{Output}} = \frac{50}{4} = 12.5
\]

4. **Marginal Cost (MC):** The cost of producing one more unit of output.
\[
MC = TC_n - TC_{n-1} = 140 - 110 = 30
\]

These calculations help understand the cost dynamics at different production levels, essential for decision-making in resource allocation and pricing strategy.

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