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The table shows output and cost data

Accounting

The table shows output and cost data. Calculate the average total cost, average fixed cost, average variable cost, and marginal cost schedules. If the market price were $500, should the firm shut down in the short run? In the long run?

 

Quantity 0 5 10 15 20 25 30 35
Total Cost $20,000 $20,500 $20,975 $21,425 $21,850 $22,300 $22,775 $23,275

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The table below shows the average total cost, average variable cost, average fixed cost, and marginal cost schedules.

 

Quantity 0 5 10 15 20 25 30 35
Total Cost $20,000 $20,500 $20,975 $21,425 $21,850 $22,300 $22,775 $23,275
FC 20,000   20,000.00   20,000.00   20,000.00   20,000.00 20,000.00 20,000.00 20,000.00
VC=TC-FC $0   500.00 975.00   1,425.00   1,850.00 2,300.00 2,775.00 3,275.00
MC 0   500.00 475.00   450.00 425.00 450.00 475.00 500.00
ATC=TC/Q -   4,100.00   2,097.50   1,428.33   1,092.50 892.00 759.17 665.00
AFC=FC/Q -   4,000.00   2,000.00   1,333.33   1,000.00 800.00 666.67 571.43
AVC=VC/Q -   100.00 97.50   95.00 92.50 92.00 92.50 93.57
P 500.00   500.00 500.00   500.00 500.00 500.00 500.00 500.00

 

In the short run, the firm should not shut down since the market price is greater than the average variable cost (P>AVC) at each level of output.

In the long run, the firm should exit the market since the market price is less than the average total cost (P<ATC) at each level of production.