-3
$\begingroup$

I've been working on solving a table for the past hour or so, I'm completely lost as it appears the values aren't quite correct, this is what we've been given to solve:

total cost table

We've been given that the market price is $7/unit.

I attempted to solve for Variable Cost first, however when I proceeded to try to get ATC once I had this, it resulted in incorrect answers, here is what I had before (given in the previous picture is bolded in the following):

attempted solution of total cost table

I'm just not exactly sure where I am going wrong, any advice would be appreciated. I am not expecting answers, but at least a bit of guidance on whether I was going the right direction already, or where I made the mistake.

Thank you!

$\endgroup$
0
$\begingroup$

The first clue you should get is TC for Q = 1 is 8 (since ATC = 8). Then as MC for Q = 1 is 3, you know that TC for Q = 0 is 8-3 = 5, which is the same as fixed cost.

$\endgroup$
-2
$\begingroup$

As you've said, each unit costs $7. Also, Total Cost= Variable Cost + Fixed Cost. Therefore, when Q=0 TC=0=VC (because the company does not produce any products). When Q=1 TC=7 and so on. Seeing your second table, you could easily calculate every TC in every production state by using TC=FC+VC. Now, if your second table is wrong follow my previous advice.

$\endgroup$
  • 1
    $\begingroup$ Market price equals \$7 (cost to consumers) is not the same as each unit costs \$7 (to produce). $\endgroup$ – Herr K. Apr 6 '18 at 16:14

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.