The following data shows total cost and demand information for Jon\'s Riding Mow

Question

The following data shows total cost and demand information for Jon's Riding Mowers.

Unit Price               >800 800        750 700 650        600 550        500        450        400        350       

Units Demanded    0              1              2              3              4              5              6              7              8 9           10

Total Cost             $ 200      $ 500      $ 700      $ 800      $ 850 $ 950 $1150    $1450    $1850    $2350    $2950

Calculate the AFC, AVC, and profit per unit if Jon sets the price at $600.

Explanation / Answer

Given that TC at 0 level of output = 200, means that this $200 is the fixed cost. At output level 1, TC = 500, of which 200 is fixed cost and 300 is variable cost. Variable cost is the cost which varies with the level of output whereas fixed cost remains the same in the short run, it does not chnage with the level of output.

AFC = Total fixed cost/output.

AVC= Total variable cost/output.

Profit is total revenue - total cost. At price = $600, demand is 5 units. TR = P*Q => 600*5 = 3000. TC at this level = 950. profit = 3000-950

Profit = $2050. Now per unit profit = 2050/5 = $410 per unit.

PRICE DEMAND/OUTPUT TOTAL COST TFC TVC AFC AVC >800 0 200 200 0 - 0 800 1 500 200 300 200 300 750 2 700 200 500 100 250 700 3 800 200 600 66.66 200 650 4 850 200 650 50 162.5 600 5 950 200 750 40 150 550 6 1150 200 950 33.33 158.33 500 7 1450 200 1250 28.57 178.57 450 8 1850 200 1650 25 206.25 400 9 2350 200 2150 22.22 238.88 350 10 2950 200 2750 20 275

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.