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A firm operates in the short run with total fixed costs of $8,000
A firm operates in the short run with total fixed costs of $8,000.00 and total variable costs (TVC) related to the quantity of output as shown below.
| Q | TVC ($) |
|---|---|
| 0 | 0.00 |
| 1 | 7,500 |
| 2 | 13,500 |
| 3 | 17,500 |
| 4 | 21,000 |
| 5 | 25,000 |
| 6 | 29,500 |
| 7 | 35,000 |
| 8 | 42,500 |
| 9 | 50,500 |
| 10 | 62,200 |
A. Calculate the average variable cost when output is 4 units.
B. Calculate the average total cost when output is 6 units.
C. What is the marginal cost of the 9th unit of output?
Expert Solution
A:$5,250
Average variable cost is TVC over quantity which at a quantity of 4 is 21,000/4=$5,250
B:$6,250
Average total cost is total cost over quantity. Total cost at quantity 6 is TVC plus fixed cost which is 29,500+8,000=37,500. This means average total cost is 37,500/6=$6,250.
C:$8000
The marginal cost of the 9th unit of output is the change in TVC from a quantity of 8 to 9 which in this case is 50,500-42,500=$8000
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