Marginal Cost
AB 224 Unit 7 Assignment
1. The accompanying table shows a car manufacturer’s total cost of producing cars.
Quantity of cars | Total Cost |
0 | $500,000 |
1 | $540,000 |
2 | $560,000 |
3 | $570,000 |
4 | $590,000 |
5 | $620,000 |
6 | $660,000 |
7 | $720,000 |
8 | $800,000 |
9 | $920,000 |
10 | $1,100,000 |
- What is this manufacturer’s fixed cost?(Don’t forget this question. Some students don’t see it.)
- For each level of output except zero output, calculate this manufacturer’s marginal cost (MC).
- For each level of output except zero output, calculate the variable cost (VC).
- For each level of output except zero output, calculate the average variable cost (AVC),
- For each level of output, calculate the average total cost (ATC),
- For each level of output except zero output, calculate the average fixed cost (AFC).
Quantity of cars | Total Cost | Marginal Cost
b. |
Variable Cost
c. |
Average Variable Cost
d. |
Average Total Cost
e. |
Average Fixed Cost
f. |
0 | $500,000 | — | — | — | — | — |
1 | $540,000 | |||||
2 | $560,000 | |||||
3 | $570,000 | |||||
4 | $590,000 | |||||
5 | $620,000 | |||||
6 | $660,000 | |||||
7 | $720,000 | |||||
8 | $800,000 | |||||
9 | $920,000 | |||||
10 | $1,100,000 |
- What number of carsis the manufacturer’s minimum cost output level?
- You produce widgets. Currently you produce 4 widgets at a total cost of $40.
- What is your average total cost?
- Suppose you could produce one more (the fifth) widget at a marginal cost of $5. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?
- Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?