Answer to Question #244530 in Microeconomics for james

Question

The total production costs of a manufacturing firm at various levels of output are given below: Output (Units) Total Cost ($) (0) 1000 (20) 1200 (40) 1300 (60) 1380 Calculate the firm’s average cost (AVC), average fixed costs (AFC) and marginal cost

Answer 1

When output is zero (0), the total cost is $1,000. Therefore, the fixed cost = $1000 at all ouput levels.

• Average Variable Cost = Variable Cost / Quantity
• Average Fixed Cost (AFC) = Fixed Cost / Quantity
• Marginal Cost (MC) = Change in Total Cost / Change in output 

We will compute the firm’s AVC, AFC, and MC at each output level as shown in the table below.