Question

Q. Output       AFC          AVC        ATC    MC    

          0         $ 300            $ ---          $ ---         $ ---

           1    300    100          400         100

           2         150                75            225         50

           3         100                 70          170          60

            4           75                 73         148         80

            5          60                   80       140        110

            6          50 90       140         140

            7           43                 103        146      180

            8            38                 119        156      230

             9           33                 138         171      290

             10          30                 160       190 360

How much is fixed cost (TFC)?

For the following questions, first check: a) is P greater than or equal to, AVC at any level of output? If not, do not produce. You will lose only your fixed cost (TFC)

If you CAN cover AVC for some level of output, you can produce and want to now get MC as close to MR (which in this case = price) without exceeding it. Produce that quantity. If you can’t cover your total costs, you will minimize your losses. If you CAN cover your total costs (and therefore earn an economic profit), you will maximize your profit.

If price is $50 per unit, how many would we produce?

If price is $105 per unit

If price is $145 per unit

If price is $190 per unit

Answer 1