Use the following to determine the total fixed cost,total variable cost, average

Question

Use the following to determine the total fixed cost,total variable cost, average fixed cost, average cost, averagetotal costs and marginal cost.

Using the table explain what happens to ATC when MC>ATC,MC<ATC, and MC=ATC








TotalOutput Cost TFC TVC AFV AVC ATC MC 0 $ 100.00





1 $ 150.00





2 $ 225.00





3 $ 230.00





4 $ 300.00





5 $ 400.00













Use the following to determine the total fixed cost,total variable cost, average fixed cost, average cost, averagetotal costs and marginal cost.

Using the table explain what happens to ATC when MC>ATC,MC<ATC, and MC=ATC








TotalOutput Cost TFC TVC AFV AVC ATC MC 0 $ 100.00





1 $ 150.00





2 $ 225.00





3 $ 230.00





4 $ 300.00





5 $ 400.00

Explanation / Answer

We see that TFC is basically just 100 throughout because at output(Q) = 0, we have 100 dollars of cost. So, TFC is 100 for all output quantity Then, TVC is just the cost minus the fixed cost... so at Q=0, TVC =0. At Q=1, TVC=50... for Q=2, 3, 4, 5... TVC= 125.00, 130.00,200.00, 300.00 respectively For AFC (which is what I think you mean.. not AFV), we find that bydividing the fixed cost by the output. So, starting at Q=1, we haveAFC = 100, at Q=2 AFC = 50... for Q=3, 4, 5.. we have AFC = 33.33,25, 20 For AVC.. it's pretty much the same as AFC where you divide thevariable cost by the output. So.. for Q=1, 2, 3, 4, 5... AVC = 50,62.50, 43.33, 50.00 60.00 For ATC... you divide the total cost by the output... so Q=1, 2, 3,4, 5 gives us ATC= 150, 112.50, 76.67, 75.00, 80 For MC, this is the marginal cost from one output to the next. Sostarting at Q=1, we see that the difference between 150 and 100 is50. So MC=50 for Q=1. Following the same logic, we find that forQ=2, 3, 4, 5... MC=75, 5, 70, 100 So, we see that when MC>ATC, ATC is increasing. When MC

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