Suppose a firm has the following output and cost structure:
Output Total Cost Marginal Cost
0 15
1 25
2 30
3 45
4 65
5 90
6 120
7 155
8 195
9 240
10 290
Fill in the marginal cost column.
1. What is the average fixed cost for the third unit of output? (Hint: What type of costs will be encountered at output 0?)
2. What is the average variable cost for the 5th unit of output?
3. What is the average total cost for the 10th unit of output?
4. Why does the marginal cost of producing the product fall and then rise? (What is the relationship between the cost curves and the production function?)
5. What is the relationship between the marginal cost and the average variable and average total costs?