Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 7, Problem 2MC
To determine
Economies of scale.
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I already filled out the table, but I don't understand how to answer 3. a, b, and c.
The table below shows the cost of producing model vintage cars for collectors.
Instructions: Enter your answers as a whole number.
a. Complete the marginal cost column in the table.
Vintage Model Car Production Costs
Total Fixed Cost
Total Variable
Cost (dollars)
Total Cost
(dollars)
$2,000
(dollars)
$2,000
Marginal Cost
(dollars)
Output
$0
1
2,000
600
2,600
2,000
1,100
3,100
2,000
1,900
3,900
4
2,000
2,900
4,900
5.
2,000
4,150
6,150
b. What is the total cost of producing 4 vintage model cars?
2.
c. What is the marginal cost of producing the 4th vintage model car?
2.
This refers to the ratio of a small increment of cost and a small increment of output.
a. Increment cost
b. Marginal cost
c. Differential cost
d. All of these
Chapter 7 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Average Cost falls when a. Marginal cost is greater than average cost b. Marginal cost is equal to average cost c. Marginal cost is constant d. Marginal cost is less than average costarrow_forwardA computer company produces affordable, easy-touse home computer systems and has fixed costs of $250. The marginal cost of producing computers is $700 for the first computer, $250 for the second, $300 for the third, $350 for the fourth, $400 for the fifth, $450 for the sixth, and $500 for the seventh. a. Create a table that shows the company’s output, total cost, marginal cost, average cost, variable cost, and average variable cost. b. At what price is the zero-profit point? At what price is the shutdown point? c. If the company sells the computers for $500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss. d. If the firm sells the computers for $300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.arrow_forwardThe Towson Table Company has fixed costs of $5,000 per month. Variable cost at the current level of output of 100 tables per month is $10,000. Which of the following is true for the company? A. Average cost of production is $150. Average cost of production is $100. C. Average fixed cost of production is $150. Average variable cost of production is $150. B. D.arrow_forward
- This is a graph of our firm’s costs. Label the lines on the graph using the following labels: average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) marginal cost (MC). Then label the shut down and breakeven points on the graph.arrow_forwardThe following table shows data for quantity (Q), variable cost (VC), and fixed cost (FC) for a ski company. a) Fill the table for total cost (TC), average variable cost (AVC), average total cost (ATC), and marginal cost (MC). Make sure to show your work for at least one line. Q VC FC TC ATC AVC MC 30 1 10 30 25 30 3 45 30 4 70 30 100 30 6 135 30 b) Now suppose the firm decides to produce a quantity of 5 units (Q=5), and it sells for a price of $25 each. Answer the following: 1. Calculate the company's profits or losses 2. How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? 3. At the given quantity and price, is the marginal unit produced adding or subtracting to profits? Should the fırm produce at this level of output?arrow_forwardIn the ice cream industry, in the short run, what cost includes the cost of cream and sugar, but not the cost of the factory. Choose all answers that are correct. a.Marginal cost b.Variable cost c.Fixed cost d.Average total costarrow_forward
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- The average total cost (ATC) curve will be downward sloping so long as the a. marginal cost is greater than average total cost. b. marginal cost is less than average total cost. c. average variable cost is less than average total cost. d. average fixed cost is less than average total costarrow_forward1. Economies and Diseconomies of scale 2. Graph of marginal cost, average cost and average total cost. Take an example 3. Marginal cost, average variable cost, and average total cost. Take an examplearrow_forwardHow profit is different from the incorporating normal profit and when the normal profit is into average cost curve?arrow_forward
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