Question

Given the following information for a restaurant, what is this firm's ATC, MC and TC at...

Given the following information for a restaurant, what is this firm's ATC, MC and TC at Q = 0, 1, 2, 3, and 4?  

Building lease = $600

Interest owner could have earned on funds invested in business = $400

Food per meal = $500 / meal

Servers for each meal = $400/ meal

Time owner spends at each meal = $100/meal

Homework Answers

Answer #1
Output Fixed cost Variable cost Total cost Marginal cost Average total cost
0 600 - 600 - 600
1 600 500+400 1500 900 1500
2 600 1000+800 2400 800 1200
3 600 1500+1200 3300 900 1100
4 600 2000+1600 4200 900 1050

Only explicit costs are considered like fixed and varibale costs. Opportunity cost of interest foregone and time spent on each meal by owner are not considered.

Hence in this case, implicit costs of interest owner could have achieved and also time spent is considered.

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