Question
Asked Dec 3, 2019
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The cost structure of a manufacturer of microchips is described in the table in the next column. The firm’s fixed costs equal to $10 per day. Calculate the average variable cost, average fixed cost, and average total cost at each output level.

 

Output (microchips per day)

Total Cost of Output
($ thousands)

0

10

25

60

50

95

75

150

100

220

125

325

150

465

 

 

 

 

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Expert Answer

Step 1

Average total cost:

Average total cost can be calculated by using the following formula:

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Total cost (1) Average total cost Output If output is 25 and total cost is 60, then the average total cost is 60 Average total cost =| 25 2.4

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Step 2

Average fixed cost:

Average fixed cost can be calculated by using the following formula:

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Total fixed cost Average fixed cost = (2) Output If output is 25 and total fixed is 10, then the average fixed cost is ´10 Average fixed cost = 25 = 0.4

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Step 3

Average variable cost:

Average variable cost can be calcula...

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Total variable cost Average variable cost =| (3) Output If output is 25 and total variable is 50, then the average variable cost is 50 Average variable cost 25 2

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