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Question 1 of 7

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You must read each slide, and complete any questions on the slide, in sequence.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for fixed cost. Round the answers to two decimal places.

Workers Total Product Fixed Cost
0 0 50
1 12 50
2 25
3 39
4 48
5 50
6 51
Table
3
Fixed cost by definition does not change. It is a constant $50 for all output levels.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for variable cost.

Workers Total Product Fixed Cost Variable Cost
0 0 50 0
1 12 50 25
2 25 50
3 39 50
4 48 50
5 50 50
6 51 50
Table
3
Here, variable cost corresponding to each level of output is $25 times the number of workers.

Fill in the column for total cost.

Workers Total Product Fixed Cost Variable Cost Total Cost
0 0 50 0 50
1 12 50 25 75
2 25 50 50
3 39 50 75
4 48 50 100
5 50 50 125
6 51 50 150
Table
3
total cost corresponding to each level of output is fixed cost plus variable cost. Add the two numbers together.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for average fixed cost. Round to two decimal places.

Workers Total Product Fixed Cost Variable Cost Total Cost Average Fixed Cost
0 0 50 0 50
1 12 50 25 75 4.17
2 25 50 50 100
3 39 50 75 125
4 48 50 100 150
5 50 50 125 175
6 51 50 150 200
Table
3
Average fixed cost corresponding to each level of output is fixed cost divided by the quantity produced. Divide the two numbers. AFC declines because fixed costs are spread out over more units.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for average variable cost.

Workers Total Product Fixed Cost Variable Cost Total Cost Average Fixed Cost Average Variable Cost
0 0 50 0 50
1 12 50 25 75 4.17 2.08
2 25 50 50 100 2.00
3 39 50 75 125 1.28
4 48 50 100 150 1.04
5 50 50 125 175 1.00
6 51 50 150 200 0.98
Table
3
Average variable cost is variable cost divided by the quantity produced. AVC rises because of increasing marginal costs and falling marginal product.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for average total cost.

Workers Total Product Fixed Cost Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost
0 0 50 0 50
1 12 50 25 75 4.17 2.08 6.25
2 25 50 50 100 2.00 2.00
3 39 50 75 125 1.28 1.92
4 48 50 100 150 1.04 2.08
5 50 50 125 175 1.00 2.50
6 51 50 150 200 0.98 2.94
Table
3
Average total cost corresponding to each level of output can be calculated in two ways. First, total cost divided by the quantity produced. Or, you can add AFC plus AVC.

Suppose that a company has a fixed cost to produce of $50. Its variable cost is $25 per worker. The following table summarizes the firm’s production and costs.

Fill in the column for marginal cost.

Workers Total Product Fixed Cost Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost
0 0 50 0 50
1 12 50 25 75 4.17 2.08 6.25 2.08
2 25 50 50 100 2.00 2.00 4.00
3 39 50 75 125 1.28 1.92 3.21
4 48 50 100 150 1.04 2.80 3.13
5 50 50 125 175 1.00 2.50 3.50
6 51 50 150 200 0.98 2.94 3.92
Table
3
Marginal cost corresponding to each level of output equals change in costs divided by change in quantity or total product. First, calculate each change from row to row (change in variable cost (VC) and change in total product (TP), i.e. the marginal product), then divide (∆VC/∆TP). Alternatively, total cost (TC) can be considered in the place of variable cost so that marginal cost equals (∆TC/∆TP). Marginal cost falls, then rises, because of specialization followed by diminishing returns.