Assignment:
1. The accompanying table shows a car manufacturer's total cost of producing cars.
|
Quantity of cars
|
Total Cost
|
|
0
|
$500,000
|
|
1
|
$540,000
|
|
2
|
$560,000
|
|
3
|
$570,000
|
|
4
|
$590,000
|
|
5
|
$620,000
|
|
6
|
$660,000
|
|
7
|
$720,000
|
|
8
|
$800,000
|
|
9
|
$920,000
|
|
10
|
$1,100,000
|
a. What is this manufacturer's fixed cost?
b. For each level of output except zero output, calculate this manufacturer's marginal cost (MC).
c. For each level of output except zero output, calculate the variable cost (VC).
d. For each level of output except zero output, calculate the average variable cost (AVC),
e. For each level of output, calculate the average total cost (ATC),
f. For each level of output except zero output, calculate the average fixed cost (AFC).
|
Quantity of cars
|
Total Cost
|
Marginal Cost
b.
|
Variable Cost
c.
|
Average Variable Cost
d.
|
Average Total Cost
e.
|
Average Fixed Cost
f.
|
|
0
|
$500,000
|
--
|
--
|
--
|
--
|
--
|
|
1
|
$540,000
|
|
|
|
|
|
|
2
|
$560,000
|
|
|
|
|
|
|
3
|
$570,000
|
|
|
|
|
|
|
4
|
$590,000
|
|
|
|
|
|
|
5
|
$620,000
|
|
|
|
|
|
|
6
|
$660,000
|
|
|
|
|
|
|
7
|
$720,000
|
|
|
|
|
|
|
8
|
$800,000
|
|
|
|
|
|
|
9
|
$920,000
|
|
|
|
|
|
|
10
|
$1,100,000
|
|
|
|
|
|
g. What number of cars is the manufacturer's minimum cost output level?
2. You produce widgets. Currently you produce 4 widgets at a total cost of $40.
a. What is your average total cost?
b. Suppose you could produce one more (the fifth) widget at a marginal cost of $5. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?
c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, hat will your average total cost be? Has your average total cost increased or decreased? Why?