Question

7. According to the following table, what is the fixed cost, marginal cost, and average total cost of producing the 4^th unit?

Output	Total Cost
0 1 2 3 4 5	$20 $30 $35 $50 $80 $115

Answer 1

The total fixed cost is $20 which is constant throughout. It is the cost incurred even when no output is produced. Since the total cost equals $20 when no output is produced, the total fixed cost is $20. The marginal cost is the change in total cost when an additional unit is produced. So, the marginal cost of fourth unit is $80 - $50 which equals $30. The average cost is the per unit cost which is calculated by dividing the total cost by output produced. So, the average cost of producing 4 units is $80/4 = $20.