Consider a firm that has a fixed cost of $60 a minute.
output=1, Variable Cost= $10 what is the fixed cost?, Total Cost? Marginal cost?, AFC?, AVC? and ATC?
Output is 2?
Can't quite figue it out... thanks
I am confused by "$60 a minute". Could you mean fixed cost is simply $60.
Let me assume just that. Fixed cost=$60.
So, when output=1, then
total cost = 10+60=70,
marginal cost = 10,
AFC=60/1=60
AVC=10/1=10
ATC=70/1=70
When output=2, (assuming MC=10) then
Total cost = 20+60=80
MC = 10
AFC = 60/2 = 30
AVC = 20/2 = 10
ATC = 80/2 = 40
To determine the fixed cost, total cost, marginal cost, average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC) for a firm, we need to understand some basic concepts and formulas.
Fixed Cost (FC):
Fixed cost is the cost that remains constant regardless of the level of output. In this case, the fixed cost is given as $60 per minute for the firm.
Variable Cost (VC):
Variable costs change with the level of output. In this case, the variable cost is given as $10 for an output of 1.
Total Cost (TC):
Total cost is the sum of fixed cost and variable cost. You can calculate it using the formula:
TC = FC + VC
To calculate the total cost, substitute the given values:
TC = $60 + $10 = $70
Marginal Cost (MC):
Marginal cost is the additional cost incurred by producing one more unit of output. It can be calculated using the formula:
MC = ΔTC / ΔQ
where ΔTC represents the change in total cost and ΔQ represents the change in output.
In this case, since the output is not given, we'll calculate the marginal cost when the output increases from 1 to 2. Assuming that the variable cost remains constant at $10 per unit, the change in total cost is equal to the change in variable cost. Therefore, the marginal cost for increasing the output from 1 to 2 can be calculated as:
MC = ΔVC / ΔQ = $10 / (2 - 1) = $10
Average Fixed Cost (AFC):
Average fixed cost is calculated by dividing the fixed cost by the level of output. In this case, as the output is not specified, we cannot calculate the average fixed cost.
Average Variable Cost (AVC):
Average variable cost is calculated by dividing the variable cost by the level of output. In this case, the variable cost is given as $10 for an output of 1. Therefore, the average variable cost can be calculated as:
AVC = VC / Q = $10 / 1 = $10
Average Total Cost (ATC):
Average total cost is calculated by dividing the total cost by the level of output. In this case, since the output is not specified, we cannot calculate the average total cost.
To summarize:
Fixed Cost (FC) = $60
Total Cost (TC) = $70
Marginal Cost (MC) = $10
Average Fixed Cost (AFC) = Not calculable without output information
Average Variable Cost (AVC) = $10
Average Total Cost (ATC) = Not calculable without output information