Karen runs a print shop that makes posters for large companies. It is a very com
ID: 1149325 • Letter: K
Question
Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $100. Her variable costs are $1,800 for the first thousand posters, $1,500 for the second thousand, and then $900 for each additional thousand posters.
Instructions: Round your answers to 3 decimal places.
a. What is her AFC per poster (not per thousand!) if she prints 1,000 posters? $.
What if she prints 2,000 posters? $.
What if she prints 10,000 posters? $.
b. What is her ATC per poster if she prints 1,000? $.
What if she prints 2,000? $.
What if she prints 10,000? $.
Explanation / Answer
Fixed cost =$100
Average fixed cost per poster if she print 1000 posters.
=FC/ numbers of posters
=100/1000
=$0.1
Hence AFC is $0.1 per poster.
If 2000 poster is printed
AFC=100/2000
=$0.05
If Karen print 10000 posters
AFC=100/10000
=$0.01
(B)
TC= FC+VC
When she produce 1000 unit of posters
TC=100+1800
=1900
ATC=TC/Q
ATC=1900/1000
=$1.9
When Q=2000
VC for first 1000 unit is 1800 and for second it is 1500
TC=100+1800+1500
TC=3400
ATC=3400/2000
=$1.7
If Q=10000
VC from 2000 unit to 10000, increases by 900 per next 1000 unit.
TC=100+1800+1500+8*900
=3400+7200
=10,600
ATC=10,600/10000
ATC=$1.06
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