EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
10th Edition
ISBN: 9781305387614
Author: MELVIN
Publisher: VST
Question
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Chapter 22, Problem 1E
To determine

To compute:

The value of TFC, TVC, AFC, AVC, ATC and MC.

Expert Solution & Answer
Check Mark

Answer to Problem 1E

    Total OutputCostsTFCTVCAFCAVCATCMC
    01001000
    1150100501005015050
    22251001255062.5112.575
    323010013033.3343.3376.675
    430010020025507570
    5400100300206080100

Explanation of Solution

TFC is the total fixed cost, TVC is the total variable cost, AFC is the Average fixed cost, AVC is the average variable cost, ATC is the average total cost and MC is the marginal cost.

TFC is constant throughout the production process; so, the TFC could be find when the output is 0.At 0 level of output, total cost is 100, which implies that the TFC is 100.

TVC is calculated by the following relation:

  Costs=TFC+TVCTVC=CostsTFC.

AFC is calculated by dividing TFC with output.

  AFC=TFCQ

Therefore, AFC at 2nd unit is,

  AFC=1002=50

Average variable cost is calculated by dividing TVC with output.

  AVC=TVCQ

AVC at 2ndunit,

  AVC=1252=62.50

ATC is the total cost by output.

  ATC=TCQ

ATC at 2nd unit,

  ATC=2252=112.50

MC is the change in total cost per an additional unit.

  MC=TC2TC1

MC at 3rd unit,

  MC=TC3TC2=230225=5

Economics Concept Introduction

Total fixed cost:

The cost incurred by a firm which remains constant irrespective of level of output.

Total variable cost:

The cost incurred in producing units of output which varies with the production level.

Total cost:

The sum of total variable cost and total fixed cost is referred as total cost.

Marginal Cost:

The additional cost of producing an extra unit of output is referred to as the marginal cost of producing that unit of output.

Average cost:

It is the cost of per unit of output produced. It is calculated by dividing total cost with variable units of output.

Average fixed cost:

It is the fixed cost divided by units of output.

Average variable cost:

It is total variable cost divided by units of output.

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