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Suppose Marcus produces chocolate with two inputs: factory and labour
Suppose Marcus produces chocolate with two inputs: factory and labour. The rent of the factory is $3,000 per week, and the wage of each worker is $2,000 per week.
When Marcus produces 200 pounds of chocolate every week, he employs 2 workers. Calculate the fixed cost (FC), variable cost (VC), total cost (TC), average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC) of producing 200 pounds of chocolate.
The total cost of producing 201 pounds of chocolate is $7030. Calculate the marginal cost (MC) of producing the 201st pound of chocolate.
Expert Solution
Computation of Marginal cost (MC) of producing the 201st pound of chocolate:
Marginal cost (MC) of producing the 201st pound of chocolate = Total Cost of producing the 201st pound of chocolate - Total Cost of producing the 200th pound of chocolate
= $7,030 - $7,000
Marginal cost (MC) of producing the 201st pound of chocolate = $30
Fixed Cost = $3,000
Variable Cost = $2,000
Total Cost = Total Fixed Cost + Total Variable Cost
= $3,000 + 2*$2,000
= $3,000+$4,000
Total Cost = $7,000
Average Fixed Cost = Total Fixed Cost/Q = $3,000/200 = $15
Average Variable Cost = Total Variable Cost/Q = $4,000/$200 = $20
Average Total Cost = $7,000/200 = 35
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