You are given the following information about the Bradford paperclip factory\'s

Question

You are given the following information about the Bradford paperclip factory's short-run costs.

Given the table above, the average total cost of producing 4 units is $_____

The marginal cost of producing unit 6 is $____   

The marginal cost of producing unit 3 is____["greater than", "lower than"] the average total cost of producing 3 units. This means that producing unit 3 causes the average total cost to____["increase", "decrease"].

Quantity Total Fixed Cost Total Variable Cost Total Cost 0 12 0 12 1 12 2 14 2 12 5 17 3 12 9 21 4 12 16 28 5 12 20 32 6 12 27 39

Explanation / Answer

The average total cost of producing 4 units is (Total cost of producing 4 units / 4) = 28/4 = $7.

The marginal cost of producing unit 6 is (39-32)= $7

The marginal cost of producing unit 3 is (32-28)=$4 and the average total cost of producing 3 units = 21/3=$7. Hence,the margina cost of producing 3 units is lower than the average total cost of producing 3 units.

This means that producing unit 3 causes the average total cost to increase.

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