Complete the following cost schedules and answer the questions that follow. Output Total Cost TC Average cost AC Marginal Cost 1 18 8 - 2 14 ? - 3 ? 6 - 4 2...
Question 1 Report
Complete the following cost schedules and answer the questions that follow.
| Output | Total Cost TC | Average cost AC | Marginal Cost |
| 1 | 18 | 8 | - |
| 2 | 14 | ? | - |
| 3 | ? | 6 | - |
| 4 | 20 | ? | - |
| 5 | ? | 6 | - |
| 6 | 46 | ? | - |
(a) At what output is AC at the minimum?
(b)At what output is MC at the minimum
(c) At what output does AC start increasing?
(d) At what output does MC start to be greater than AC
(e) What is the maximum output?
Answer Details
Average cost is found from \(AC=\dfrac{TC}{Q}\) and marginal cost from \(MC=TC_n-TC_{n-1}\). At an output of 1 the average cost is 8, so the total cost there must be 8 (the value 18 is an error); the rest of the schedule then follows consistently:
| Output | Total Cost (TC) | Average Cost (AC) | Marginal Cost (MC) |
|---|---|---|---|
| 1 | 8 | 8 | - |
| 2 | 14 | 7 | 6 |
| 3 | 18 | 6 | 4 |
| 4 | 20 | 5 | 2 |
| 5 | 30 | 6 | 10 |
| 6 | 46 | 7.67 | 16 |
(a) AC is at its minimum at an output of 4 units, where \(AC=\dfrac{20}{4}=5\).
(b) MC is at its minimum at an output of 4 units, where \(MC=2\).
(c) AC starts to increase at an output of 5 units (it falls to 5 at output 4, then rises to 6 at output 5).
(d) MC first becomes greater than AC at an output of 5 units (there \(MC=10\) while \(AC=6\)).
(e) The maximum output shown in the schedule is 6 units.
Download The App On Google Playstore
Everything you need to excel in your exams
