Question

Recent developments in solar heating technology have made it possible to grow and deliver vegetables in Canada as cheaply as in California or Mexico. Moreover, the technology is “cost efficient” even for small producers such as family farms.

You are a farmer in the Taber area using this technology to grow carrots year around in a climatically controlled greenhouse.

Suppose you have estimated the total cost of producing different quantities of carrots as follows:

QUANTITY (in bundles)	TC	AFC	AVC	ATC	MC
0	$60	---	---	---	---
600	$180
1000	$240
1200	$264
1500	$337.50

1. Complete the table.

2. If 600 bundles of carrots were produced per week, what would total fixed costs be?

3. If 1200 bundles of carrots were produced per week, what would total fixed costs be?

4. What quantity of production would production be at its most efficient?  

Please provide correct answers. thanks.

Please answer ASAP.

Answer 1

a) Ans:

QUANTITY (in bundles)	TC	AFC	AVC	ATC	MC
0	$60	--	--	--	--
600	180	$0.10	$0.20	$0.30	$0.20
1000	240	0.06	0.18	0.24	0.15
1200	264	0.05	0.17	0.22	0.12
1500	337.5	0.04	0.19	0.23	0.25

Explanation:

TC = FC + VC

AFC = FC / Q

AVC = VC / Q

ATC = TC / Q

MC = Change in TC / Change in Q

Fixed cost are available even at zero level of output and remain constant throughout the subsequent level of production.

Ans: If 600 bundles of carrots were produced per week, total fixed costs would be $60.

Ans: If 1200 bundles of carrots were produced per week, total fixed costs would be $60.

Ans: The most efficient level of production would be 1200 bundles.

Explanation:

An efficient level of production is achieved where average total cost is minimum. In the above case , at 1200 bundles, ATC is minimum. So this is an efficient level of production.