Question

ProPainters hires students at​ $250 a week to paint houses. It leases equipment at​ $500 a week. The table sets out its total product schedule.

If ProPainters paints

1414

houses a​ week, calculate its total​ cost, average total​ cost, and marginal cost.

At what output is average total cost a​ minimum?

If ProPainters paints

1414

houses a​ week, total cost is​ ______ and average total cost is​ ______.

A.

​$1 comma 2501,250​;

​$89.2989.29

B.

​$1 comma 7501,750​;

​$125.00125.00

C.

​$4 comma 0004,000​;

​$285.71285.71

D.

​$3 comma 5003,500​;

​$250.00250.00

Labor	Output
​(students)	​(houses painted per​ week)
1	2
2	5
3	9
4	12
5	14
6

Answer 1

Labor (Students)	Output (House painted per week)	Total variable cost	Total fixed cost	Total cost	Average total cost	Marginal Cost
1	2	250	500	750	375	-----
2	5	500	500	1000	200	83.33
3	9	750	500	1250	138.89	62.5
4	12	1000	500	1500	125	83.33
5	14	1250	500	1750	125	125
6	15	1500	500	2000	133.33	250

Total Variable cost = Number of labor * $250.

Total fixed cost is $500 at each level of output.

Total cost = Total variable cost + Total fixed cost

Average total cost = Total cost / Output.

Marginal cost = (Change in total cost / Change in output)

----------------------

If Propainters paints 14 houses a week, total cost $1750, and average total cost is 125.

Answer: Option (B).

Average total cost is minimum at the point where Marginal cost is equal to Average total cost.

Marginal cost = Average total cost = 125 corresponding to 14 units of output.

Hence, at 14 units of output average total cost is minimum.