Question
I know I'm supposed to use the formulas to calculate the TC, TFC, and AVC, but I'm not sure what numbers to use from this graph.
Does MC=TC?!
1. How do I find the TC of 12 units of x?
2. How do I find the TFC of 15 units of x?
3. How do I find the AVC of 12 units of x?
4.The slope of the TVC function at 7 units of output is (greater / smaller) than 4 and why?
4.At the level of output at which ATC has its minimum, TC is greater than$ _, but less than $ __.(The estimated range of TC should not exceed $24.) How do I find this?!
5.At output level 5, MC of (greater / smaller) than AFC and why?
6.At output level 7, TVC is (greater / smaller) than $20.00 and why?
7. The flatness point on the TC function (i.e. the point at which the numerical value of the slope is at a minimum) occurs at the output level __________ and why?
Explanation / Answer
Marginal Cost is not equal to Total Cost. Marginal Cost is equal to Marginal Revenue. 1) Total cost of 12 units of x- ATC for 12 units is $8 as seen from graph since, Average Total Cost=Total cost divided by number of units , therefore- Total Cost=$8*12=$96 2) Total Fixed cost for 15 units of x- Fixed cost= Total cost- variable cost At, x=5 ATC=$8 and AVC=$4 i.e., TC=$40 and VC=$20 ==> Fixed cost=$20 Fixed cost remains unchanged with the quantity produced therefore at x=15 fixed cost will be the same and it would be $20. 3) Since , Total cost=Fixed cost + Variable cost therefore, Total Variable cost=Total cost-Fixed Cost ==> Total cost at x=12 is $96(as from part 1) and fixed cos is $20 ==>Total Variable cost=$76 at x=12 units hence, AVC=76/12=$6.33 5)At x=5, Average fixed cost =$20/5=$4 from graph we can see that MCMC at x=5 6)At x=7 Average Variable cost is less than $4 therefore Total variable cost would be less than $28 when x=7 and around $20 when x=6 hence, at x=7 : TVC>$20 7)To get the minimum of TC function we take the derivative of TC function wrt x This gives us MC curve, slope of MC curve=0 signifies flatness point on the TC function, we can see this from graph that slope of MC=0 at x=4 hence, at x=4 there is flatness point on the TC function. I could'nt figure out the 4th part but I am sure this would have helped.PLEASE RATE