Consider the cost curves depicted in Figure 1. The letters (A, B, C,... refer to
ID: 1109393 • Letter: C
Question
Consider the cost curves depicted in Figure 1. The letters (A, B, C,... refer to areas, the letters,92,93,%) refer to quantities, and the letters (n,v2, t ,ta) refer to values in dollars. Use Figure 1 to answer the following questions. 1. What is the level of production corresponding to the break-even point of production? 2. What is VC when gs units of output are produced? 3. What is MC when gi units of output are produced? 4. What is FC? 5. What does the area"IJ" represent? 6. Suppose that the average variable cost is equal to vi. What is the level of production?Explanation / Answer
1. break even point of production is at MC = ATC
hence at price V3 when production is q2.
2.when q3 unit of output are produced variable cost VC = v2
3 when q1 unit of output are produced MC is v1
4. FC means fixed cost is a cost when level of production is zero.In this case Fc is zero
5. Area under MC curve represent TVC
hence area inclosed by I and J show total variable cost of producinf q1 level of production .
6.when AVC is v1 then level of production is q2