Explore BrainMass
Share

Explore BrainMass

    Cost Estimation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A firm has total fixed costs of $60 and average variable costs as indicated in the table below.

    Total Output Average Variable Cost

    0 $0

    1 45.00

    2 42.50

    3 40.00

    4 37.50

    5 37.00

    6 37.50

    7 38.57

    8 40.63

    9 43.33

    10 46.50

    a) Calculate AFC, ATC, MC, and TC.

    b) At a product price of $56, will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit-maximizing output? What economic profit will the firm realize at the profit-maximizing?

    c) How are your answers of the question b) changed if the price changed to $41?

    © BrainMass Inc. brainmass.com October 10, 2019, 3:49 am ad1c9bdddf
    https://brainmass.com/economics/perfect-competition/calculate-afc-atc-mc-tc-436626

    Solution Preview

    Please refer attached file for better clarity of table.

    Q AVC TVC=AVC*Q FC TC=FC+TVC AFC=FC/Q ATC=TC/Q MC*
    0 0.00 0.00 60.00 60.00
    1 45.00 45.00 60.00 105.00 60.00 105.00 45.00
    2 42.50 85.00 60.00 145.00 30.00 72.50 40.00
    3 40.00 120.00 60.00 180.00 20.00 60.00 35.00
    4 37.50 150.00 60.00 210.00 15.00 52.50 30.00
    5 37.00 ...

    Solution Summary

    The solution describes the steps to calculate AFC, ATC, MC, and TC. It also calculates economic profits at the given market price levels.

    $2.19