Costs of Production Questions: Use the following information to answer the four
ID: 1173804 • Letter: C
Question
Costs of Production Questions:
Use the following information to answer the four questions listed:
UNITS OF OUTPUT: 1, 2, 3, 4, 5
TOTAL FIXED COSTS: 1000
TOTAL VARIABLE COSTS: 200,450, 800,1350,1950
1. Given the costs schedule above, what is the average total cost of producing four units of output?
2. Given the costs schedule above, the total cost of producing three units of output is ________.
3. Given the costs schedule above, it can be seen that the marginal cost of the third unit produced is _____.
4. As output increases, variable costs tend to _____.
Explanation / Answer
TC = TVC + TFC
MC (nth unit) = TC (n units) - TC ((n-1) units)
1) ATC = TC/Q = 2350/4 = 587.5
2) TC = 1800
3) MC (Q = 3) = 350
4) As output increases, variable costs tend to increase.
Q TVC TFC TC MC 1 200 1000 1200 200 2 450 1000 1450 250 3 800 1000 1800 350 4 1350 1000 2350 550 5 1950 1000 2950 600