Work It Out, Chapter 11, Step 2

(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)

(Speaker)
For this part of the problem, we're going to calculate the variable cost for this firm.

(Description)
The table consists of 2 columns: Quantity of Cars, TC (Total Cost). The table consists of 11 rows. The first row: Quantity of Cars is, 0, TC is, 500 thousand dollars. The second row: Quantity of Cars is, 1, TC is, 540 thousand dollars. The third row: Quantity of Cars is, 2, TC is, 560 thousand dollars. The fourth row: Quantity of Cars is, 3, TC is, 570 thousand dollars. The fifth row: Quantity of Cars is, 4, TC is, 590 thousand dollars. The sixth row: Quantity of Cars is, 5, TC is, 620 thousand dollars. The seventh row: Quantity of Cars is, 6, TC is, 660 thousand dollars. The eight row: Quantity of Cars is, 7, TC is, 720 thousand dollars. The ninth row: Quantity of Cars is, 8, TC is, 800 thousand dollars. The tenth row: Quantity of Cars is, 9, TC is, 920 thousand dollars. The eleventh row: Quantity of Cars is, 10, TC is, 1 million 100 thousand dollars. The following text is written above the table: Complete the table by calculating the variable cost (VC) for each level output.

(Speaker)
The variable cost is calculated as the difference between total cost and fixed cost.

(Description)
An additional column is added to the right side of the table. It is named as Variable Cost (VC) The following text is written below the table: Variable costs equal the difference between total cost and fixed cost.

(Speaker)
When the firm produced zero cars, variable costs are also zero.

(Description)
A cell at the intersection of the first row and the column Variable Cost (VC) is, equals 500 thousand dollars minus 500 thousand dollars equals zero dollars. This cell is briefly highlighted.

(Speaker)
For the first car, we can calculate variable costs as 540 thousand dollars less 500 thousand dollars, which is just total costs less fixed costs. Variable costs for producing one car are 40 thousand dollars.

(Description)
A cell at the intersection of the second row and the column Variable Cost (VC) is, equals 540 thousand dollars minus 500 thousand dollars equals 40 thousand dollars. This cell is briefly highlighted.

(Speaker)
We can subtract fixed costs from the remaining levels of output.

(Description)
Cells at the intersection of rows three to eleven and the column Variable Cost (VC) are, equals 560 thousand dollars minus 500 thousand dollars equals 60 thousand dollars, equals 570 thousand dollars minus 500 thousand dollars equals 70 thousand dollars, equals 590 thousand dollars minus 500 thousand dollars equals 90 thousand dollars, equals 620 thousand dollars minus 500 thousand dollars equals 120 thousand dollars, equals 660 thousand dollars minus 500 thousand dollars equals 160 thousand dollars, equals 720 thousand dollars minus 500 thousand dollars equals 220 thousand dollars, equals 800 thousand dollars minus 500 thousand dollars equals 300 thousand dollars, equals 920 thousand dollars minus 500 thousand dollars equals 420 thousand dollars, equals 1 million 100 thousand dollars minus 500 thousand dollars equals 600 thousand dollars, respectively.

(Speaker)
You would notice that variable costs are increasing at an increasing rate.