Answer to Question #112429 in Accounting for Sami

Question

A firm has fixed cost of $100 and average variable cost of $5 X Q, where Q is the number of units produced.
a. Construct a table showing total cost for Q from 0 to 10
b. Graph the firm's curves for marginal cost and average total cost.
c. How does marginal cost change with Q? What does this suggest about the firm's production process?

Answer 1

Q=0, Total cost = 100

Q=1, Total cost = 105

Q=2, Total cost = 110

Q=3, Total cost = 115

Q=4, Total cost = 120

Q=5, Total cost = 125

Q=6, Total cost = 130

Q=7, Total cost = 135

Q=8, Total cost = 140

Q=9, Total cost = 145

Q=10, Total cost = 150

Marginal Cost is the increase in cost caused by producing one more unit of the good. The Marginal Cost curve is U shaped because initially when a firm increases its output, total costs, as well as variable costs, start to increase at a diminishing rate. Then as output rises, the marginal cost increases.

https://commons.m.wikimedia.org/wiki/File:Costcurve_-_Combined.svg