Output Total cost Total Variable Cost Total Fix cost Marginal Cost 0 $200 1 100
ID: 1117795 • Letter: O
Question
Output
Total cost
Total Variable Cost
Total Fix cost
Marginal Cost
0
$200
1
100
2
$450
21. When nothing is produced, the firm’s total fixed cost and total variable cost are, respectively:
a. Zero and $200.
b. $100 and $100
c. $200 and zero
d. $200 and $100
22. When one unit of output is produced, the firm” total cost and total variable cost are
a. $150 and $150.
b. $200 and $100
c. $300 and $100
d. $325 and $100
23. The marginal cost of the second unit of output is
a. $100
b. $150
c. $250
d. $350
24. The average total cost when two units of output are produced is
a. $150
b. $225
c. $325
d. $450
Output
Total cost
Total Variable Cost
Total Fix cost
Marginal Cost
0
$200
1
100
2
$450
Explanation / Answer
CALCULATION STEPS:
Step-1: when output is zero, variable cost is zero and all cost is the total cost. Given that total cost = $200 when output is 0, it means fixed cost = $200. Fixed cost remains fixed with output, so it is $200 for all levels of output.
Step-2: Total cost of 2nd unit = total cost of first unit + marginal cost of second unit = $200 + $100 = $300
Step 3: Variable cost of first unit = Total cost of first unit – fixed cost = $300 - $200 = $100
Variable cost of second unit = Total cost of 2nd unit – fixed cost = $450 - $200 = $250
Step – 4: Marginal cost for 2nd unit = total cost of 2nd unit – total cost of first unit = $450 - $300 = $150
Complete table:
Output
Total Cost
Total Variable Cost
Total Fixed Cost
Marginal Cost
0
$200
0
$200
-
1
$200 + $100 = $300
$300 - $200 = $100
$200
100
2
$450
$450 - $200 = $250
$200
$450 - $300 = $150
Answers:
21. option c.
22. option c.
23. option b
24. option b
Explanation: when 2 units are produced, total cost = $450. So, average total cost = $450/2 = $225.
Output
Total Cost
Total Variable Cost
Total Fixed Cost
Marginal Cost
0
$200
0
$200
-
1
$200 + $100 = $300
$300 - $200 = $100
$200
100
2
$450
$450 - $200 = $250
$200
$450 - $300 = $150
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