Question

Data for Dahlia’s Dresses Quantity Total Cost 0 10 1 18 2 23 3 38 4 52 49. What is the firm’s total variable cost at an output of 3 dresses? __________________

b) If each dress is sold for $20, what would be the profit for three dresses? ___________

Answer 1

Ans.

Total Cost = Variable Cost + Fixed cost

and Fixed cost = Total Cost (at Q = 0) = $10

=> Variable cost = Total Cost - Fixed Cost = Total Cost - 10

Using the above formulas to complete the table, we get,

Quantity. Total Cost. Fixed Cost. Variable Cost

0 10 10 0

1 18 10 8

2 23 10 13

3 38 10 28

4. 52. 10. 42

a) Thus, variable cost when output is of 3 dresses is = $28

b) Price of each dress = $20

=> Total revenue = Price * Output = 20*3 = $60

=> Profit = Total Revenue- Total Cost = 60 - 38 = $22