Given the following data, anwer questions (a) and (b). The total fixed cost for
ID: 1191201 • Letter: G
Question
Given the following data, anwer questions (a) and (b). The total fixed cost for the Grand Forks Clinic is $30 per month. The total variable cost is given as follows:
Quantity of Visits: 1 2 3 4 5 6
Total Cost Per Week: $10 25 45 70 105 145
a. If the price per visit is $30, what is the quantity supplied? Is the quantity supplied 1?
b. If the total fixed costs increases to $40 and the price per visit is $30, what is the quantity supplied? Is the quantity suppplied also 1?
If my answer is incorrect, please explain what I should be looking for. Thank you in advance!
Explanation / Answer
(a) Price per visit (P) = $30
Total fixed cost = $30
Following is the required table –
Quantity of Visits
(Q)
Total Fixed Cost
(TFC)
Total Variable Cost
(TVC)
Total Cost
(TFC + TVC)
Total Revenue
(P * Q)
Profit
(TR – TC)
1
30
10
40
30
-10
2
30
25
55
60
5
3
30
45
75
90
15
4
30
70
100
120
20
5
30
105
135
150
15
6
30
145
175
180
5
According to TR-TC approach, a firm should produce or supply that level of output at which the difference between its total revenue and total cost is positively maximized and total profit fall as more units are supplied or produced.
As above table shows that when 4 units are supplied, difference between the total revenue and total cost is positively maximized and further production is resulting in a fall in profit.
So, if price per visit is $30, quantity supplied is 4 visits.
(b) Price per visit (P) = $30
Total fixed cost = $40
Following is the required table –
Quantity of Visits
(Q)
Total Fixed Cost
(TFC)
Total Variable Cost
(TVC)
Total Cost
(TFC + TVC)
Total Revenue
(P * Q)
Profit
(TR – TC)
1
40
10
50
30
-20
2
40
25
65
60
-5
3
40
45
85
90
5
4
40
70
110
120
10
5
40
105
145
150
5
6
40
145
185
180
-5
According to TR-TC approach, a firm should produce or supply that level of output at which the difference between its total revenue and total cost is positively maximized and total profit fall as more units are supplied or produced.
As above table shows that when 4 units are supplied, difference between the total revenue and total cost is positively maximized and further production is resulting in a fall in profit.
So, if fixed cost increases to $40 but price per visit remains at $30, quantity supplied is 4 visits.
Quantity of Visits
(Q)
Total Fixed Cost
(TFC)
Total Variable Cost
(TVC)
Total Cost
(TFC + TVC)
Total Revenue
(P * Q)
Profit
(TR – TC)
1
30
10
40
30
-10
2
30
25
55
60
5
3
30
45
75
90
15
4
30
70
100
120
20
5
30
105
135
150
15
6
30
145
175
180
5
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