1. The table below shows the monthly cost of producing vintage model cars for collectors for quantities 0, 100, 200, and 500.

a. Complete the table by filling in the average fixed cost, average variable cost, and average total cost.

Answer:

Average Fixed Cost	Average Variable Cost	Average Total Cost
–	–	–
30	12	42
15	8.5	23.5
6	9.5	15.5

Step-by-step explanation

To guide you on completing the table, the required formula are:

• Average Fixed Cost
  • Total fixed costs are divided by output to find average fixed costs. Average fixed costs will continue to reduce when fixed expenses are split by increasing productivity or the output itself which can be seen on the computation (As output increases to 200, AFC decreases to 15. As output increases to 500, AFC decreases to 6)
  • Formula:  Provided Total Fixed Cost divided by the Output

Output	Total Fixed Cost	Average Fixed Cost
0	$3,000	–
100	3,000	3000 / 100 = 30
200	3,000	3000 / 200 = 15
500	3,000	3000 / 500 = 6

• Average Variable Cost
  • The variable cost for every item is described by average variable cost. Variable costs are those who will fluctuate as the output increases or decreases.
  • Formula: Provided Total Variable Cost divided by the Output

Output	Total Variable Cost	Average Variable Cost
0	$0	–
100	1,200	1200 / 100 = 12
200	1,700	1700 / 200 = 8.5
500	4,750	4750 / 500 = 9.5

• Average Total Cost
  • Average total cost is the sum among all of the expenditures or the costs that are associated in the production of units which are then divided by the production volume or the output itself.
  • Formula: Provided Total Cost divided by the Output

Output	Total Cost	Average Total Cost
0	$3,000	–
100	4,200	4200 / 100 = 42
200	4,700	4700 / 200= 23.5
500	7,750	7750 / 500 = 15.5

2. The table below shows the monthly cost of producing vintage model cars for collectors.

a. Fill in the missing values for total fixed cost, total variable cost, and total cost in the table below.

Answer:

0 2500 0 2500

100 2500 500 3000

200 2500 1000 3500

300 2500 2000 4500

400 2500 3000 5000

3. The table below shows Crystal’s total cost of producing different quantities of tie-dyed t-shirts for a local arts festival.

a. Complete the marginal cost column in the table.

Cost of Tie-Dyed T-Shirts

Output

Total Cost

(dollars)

Marginal Cost

(dollars)

0

$15

—

1

18

$

2

20

3

21

4

24

5

29

6

36

b. What is the total cost of producing 5 tie-dyed t-shirts?

$

c. What is the marginal cost of producing the 5th tie-dyed t-shirt?

$

d. Graph the marginal cost curve for producing tie-dyed t-shirts.

4. If marginal cost exceeds average total cost in the short run, then which is likely to be true?

A. Average total cost is increasing.

B. Average variable cost is decreasing.

C. Average total cost is less than average variable cost.

D. Marginal cost is less than average variable cost.

Answer: . Marginal cost is less than average variable cost.

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