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HW5 Solutions - Homework 5 Question 1 A 1 fixed cost Answer...

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Homework 5 Question 1. A. 1. fixed cost Answer: all costs of production that do not vary with level of output. In other words, they are those costs that do not depend on the quantity produced. 2. total variable cost Answer: Total costs of production that vary directly with the level of output. 3. total cost Answer: total cost to the firm of producing any given level of output. 4. average total cost Answer: total cost of producing a given output divided by the number of units of output. 5. average variable cost Answer: Total variable cost divided by the number of units of output. 6. marginal cost Answer: The increase in total cost resulting from raising the production by one unit. B . Ans w er: Quantity FC TVC TC MC ATC AVC 0 18 0 18 - - - 1 18 8 26 8 26 8 2 18 14 32 6 16 7 3 18 18 36 4 12 6 4 18 20 38 2 9.5 5 5 18 24 42 4 8.4 4.8 6 18 30 48 6 8 5 7 18 38 56 8 8 5.4 8 18 48 66 10 8.25 6 C. See attached graph.
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The data used to draw this picture are from question B. When quantity is 0 ATC, AVC and MC where not defined. A very big number (100) has been chosen to draw the picture. Why?
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