The Grinch Clinic pays its nurses $20 an hour. It also pays $100 a week rent and

Question

The Grinch Clinic pays its nurses $20 an hour. It also pays $100 a week rent and has other weekly overhead costs of $50. Supply costs are $1 per patient. The short-run production function, relating patient visits and hursing hours, is shown here. Given this relationship and the other specified data, calculate the total variable, total fixed, and total costs; average costs (variable, fixed, and total); and marginal costs at each output level.

Patient Visits: 1 - 2 - 3 - 4 - 5 - 6

Nursing Hours: 2 - 4 -8 - 14 - 22 - 32

I understand the Total Fixed Costs is $150; I also have the nurse cost, which is the nurses hours multipled by $20 per hour rate. What I don't understand is how to get the Total Variable Cost (TVC). Textbook shows the Total Variable Costs plus the Patient Visit. For example the first TVC is 41 (40 + 1 Patient Visit). Is this correct way to gete the TVC? If so, please explain. I believe once I understand how to get the TVC that I will be able to get the Total Cost, Average Total Cost and Marginal Cost.

Please help. Thank you.

Explanation / Answer

Yes Total fixe costs are 150 as the rent and overhead costs are assumed to be fixed and cannot change in the short run.

Your total variable cost has two parts, first the nurse cost and second the supply cost per patient.

This supply cost can understood as the referral commison the clinic maybe paying for patient referral or simply the cost to print the patients report.

Therefore TVC = nurse cost + patient visit*supply cost

TVC = Nurse hours* 20 + Patient visit * 1

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