Chapter 11, Problem 10P

To determine

The schedule for total costs, fixed costs, variable costs, average total cost, average fixed cost, average variable cost and marginal cost for Attractive Magnet Co. for 2018.

Answer to Problem 10P

Total Product (Q)	Fixed Cost (FC)	Variable Cost (VC)	Total Cost (TC)	Average Fixed Cost (AFC)	Average Variable Cost (AVC)	Average Cost (AC)	Marginal Cost (MC)
1	100	30	130	100	30	130	30
2	100	50	150	50	25	75	20
3	100	60	160	33.33	20	53.33	10
4	100	64	164	25	16	41	4
5	100	90	190	20	18	38	26
6	100	126	226	16.67	21	37.67	36
7	100	168	268	14.28	24	38.28	42
8	100	218	318	12.5	27.25	39.75	50

Explanation of Solution

Using the following formulas, we calculate the values of the table.

  $\begin{array}{l}1)Variable\text{C}ost(VC)=Totaloutput\times AverageVariable\text{C}ost\\ \Rightarrow \boxed{VC=Q\times AVC}\\ 2)TotalCost(TC)=Variable\text{C}ost+FixedCost\\ \Rightarrow \boxed{TC=VC+FC}\\ 3)AverageFixedCost(AFC)=\frac{FixedCost}{Totaloutput}\\ \Rightarrow \boxed{AFC=\frac{FC}{Q}}\\ 4)AverageVariableCost(AFC)=\frac{VariableCost}{Totaloutput}\\ \Rightarrow \boxed{AVC=\frac{VC}{Q}}\\ 5)AverageCost(AC)=\frac{TotalCost}{Totaloutput}\\ \Rightarrow \boxed{AC=\frac{TC}{Q}}\\ 6)MarginalCost(MC)=\frac{TotalCost}{Totaloutput}\\ \Rightarrow \boxed{MC=\frac{\Delta TC}{\Delta Q}}\\ or,\\ \boxed{M{C}_n=V{C}_n-V{C}_{n-1}}\end{array}$ v

Total Product (Q)	Fixed Cost (FC)	Variable Cost (VC)	Total Cost (TC)	Average Fixed Cost (AFC)	Average Variable Cost (AVC)	Average Cost (AC)	Marginal Cost (MC)
1	100	30	130	100	30	130	30
2	100	50	150	50	25	75	20
3	100	60	160	33.33	20	53.33	10
4	100	64	164	25	16	41	4
5	100	90	190	20	18	38	26
6	100	126	226	16.67	21	37.67	36
7	100	168	268	14.28	24	38.28	42
8	100	218	318	12.5	27.25	39.75	50

Economics Concept Introduction

Total cost: TC are the total outlay in production activity.

Fixed costs: FC are the costs that once incurred remain same at all levels of output.

Variable costs: VC are the costs that vary with the level of output.

Average total cost: ATC is the total cost per unit of output.

Average fixed cost: AFC is the fixed cost per unit of output.

Average variable cost: AVC is the variable cost per unit of output.

Marginal Cost: MC is an add on to the total cost (or total variable cost) when an extra unit of output is produced.