Question

Quantity of Lanterns Fixed Cost ($) Variable Cost ($) Total Cost ($) Average Total Cost ($)...

Quantity of Lanterns Fixed Cost ($) Variable Cost ($) Total Cost ($) Average Total Cost ($)
50 250 250 500 10.00
75 250 390 640 8.53
90 250 522 772 8.58
120 250 714 964 8.03
150 250 1049 1299 8.66
200 250 1600 1850 9.25
210 250 2100 2350 11.19

The table above shows cost data for a producer of lighting fixtures. Answer the questions using the information shown in the table and show your calculations.

1. What is the total variable cost of production when the firm produces 150 lanterns?

2. What is the total fixed cost of production when the firm produces 210 lanterns?

3. What is the average total cost per unit of production when the firm produces 120 lanterns?

4. If the producer wants to maximize its profit, assuming a constant market price, how many lanterns should it produce?

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Homework Answers

Answer #1

1. TVC at 150 lanterns = 1049

2. TFC at 210 lanterns = 250

3. ATC at 120 lanterns = 964/120 = 8.03

4. To maximize profit, the firm can produce at a point where ATC is minimum and hence it can produce 120 units. Below as an example it can be seen, by keeping price at $10, the profit is maximised

Quantity of Lanterns Total Cost ($) Average Total Cost ($) TR at price of $10 Profit= TR-TC
50 500 10 500 0
75 640 8.53 750 110
90 772 8.58 900 128
120 964 8.03 1200 236
150 1299 8.66 1500 201
200 1850 9.25 2000 150
210 2350 11.19 2100 -250
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