SolutionsCF8e-Ch8

SolutionsCF8e-Ch8 - Case/Fair Microeconomics Solutions...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Case/Fair Microeconomics Solutions CHAPTER 8 1. The monthly payment and the insurance do not depend on the amount that you drive. They must be paid even if you do not drive. Thus, the fixed costs are $418.71 per month. The marginal cost of a mile driven is $1.50 divided by 20, or 7.5 cents, plus 15 cents for a total of 22.5 cents per mile. The “cost” of a trip to Pittsburgh would be $225. Only the variable costs of 22.5 cents x 1,000 miles are incurred as a result of the trip. Some would argue that only the interest portion of the monthly payment is a cost because the principal repayment represents a form of saving because you will fully own the car in five years. 2. At 5 million copies AFC = $6, at 10 million copies AFC = $3 and at 20 million copies AFC = $1.50. If each book costs $1.50, and that is true for every book up to 40 million, then the average variable cost of a volume is $1.50 regardless of how many volumes come off the press, at least up to 40 million. If the producer prints 5 million copies, total fixed cost is $30 million, and total variable cost is 5 million times $1.50 or $7.5 million. Thus, total cost is $37.5 million and average total cost is $37.5 million divided by 5 million or $7.50. You can get this same answer by simply adding
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern