Question

# Table 2.a. shows an LED light bulb manufacturer’s total cost of producing LED light bulbs. Table...

Table 2.a. shows an LED light bulb manufacturer’s total cost of producing LED light bulbs.

Table 2.a.

 Cases of LED light bulbs produced in an hour Total Cost 0 \$4,500 10 \$4,900 20 \$5,100 30 \$5,300 40 \$5,400 50 \$5,700 60 \$6,700 70 \$7,900 80 \$9,700 90 \$11,800

1. What is this manufacturer’s fixed cost? Explain why. (1 point)

2. Assuming that you only know the Total Costs (TC) (as is shown in the Table 2.a. above) explain how you would calculate each of the following:

a. Variable Cost (VC) (1 point);

b. Average Variable Cost (AVC (1 point));

c. Average Total Cost (ATC) (1 point);

d. Average Fixed Cost (AFC) (1 point) ; and,

e. Marginal Costs (of a single case). (1 point)

 Cases of LED light bulbs produced in an hour, Q Total Output, TC Fixed Cost, FC (a) Variable Cost, VC=TC-FC (b) ATC= TC/Q (c) AFC=FC/Q (d) (e) 0 4500 4500 0 10 4900 4500 400 490.00 450.00 40.00 20 5100 4500 600 255.00 225.00 20.00 30 5300 4500 800 176.67 150.00 20.00 40 5400 4500 900 135.00 112.50 10.00 50 5700 4500 1200 114.00 90.00 30.00 60 6700 4500 2200 111.67 75.00 100.00 70 7900 4500 3400 112.86 64.29 120.00 80 9700 4500 5200 121.25 56.25 180.00 90 11800 4500 7300 131.11 50.00 210.00

a)

Fixed Cost is independent of output level. So, Fixed Cost is equal to total cost at zero output.

FC= TC at zero output=\$4500

b)

Variable Cost=VC=TC-FC

(Please refer above table for values)

c)

Average Total Cost=ATC=TC/Q

(Please refer above table for values)

d)

Average Fixed Cost=AFC=FC/Q

(Please refer above table for values)

e)

(Please refer above table for values)

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