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4. The average total cost to produce 500 ice cream cones is $0.45 per cone. The...

4. The average total cost to produce 500 ice cream cones is $0.45 per cone. The marginal cost is constant at $0.15 for each cone produced. Compute the following.

a. What is the total cost for producing 500 ice cream cones?

b. What is the total fixed cost of production for ice cream cones?  

c. What is the total variable cost of production for 200 ice cream cones?  

d. What is the total cost of production for 200 ice cream cones?

e. Is average total cost for 500 ice cream cones falling? Rising?

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Answer #1

4. The average total cost to produce 500 ice cream cones is $0.45 per cone. The marginal cost is constant at $0.15 for each cone produced.

a. What is the total cost for producing 500 ice cream cones?

Given that ATC = 0.45 for 1 cone when Q = 500. TC at Q = 500 is 500*0.45 = $225

b. What is the total fixed cost of production for ice cream cones?  

Since marginal cost is $0.15 for 1 cone, Variable cost is 0.15*500 = $75. Fixed cost = 225 - 75 = $150.

c. What is the total variable cost of production for 200 ice cream cones?  

TVC for Q = 200 is 200*0.15 = $30

d. What is the total cost of production for 200 ice cream cones?

Total cost = TVC + TFC = 30 + 150 = $180.

e. Is average total cost for 500 ice cream cones falling? Rising?

Since ATC is 0.45 and MC is 0.15, ATC is > MC. Hence ATC is rising.

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