Output |
Total Cost |
0 1 2 3 4 5 |
$20 $30 $35 $50 $80 $115 |
The total cost includes the total fixed cost (cost incurred even when no output is produced) and the total variable cost (cost which varies with output produced). So, the total fixed cost is $20 as the total cost is $20 when no output is produced.
The marginal cost is the additional cost incurred from increasing the production by one unit. So, the marginal cost of the fourth unit is $80 - $50 = $30.
The average total cost of fourth unit is calculated below:
Average Total Cost = Total Cost / Output Produced
Average Total Cost = $80/4 = $20
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