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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Compute the average total cost, average variable cost, and marginal cost of producing 50 and 72 haircuts. Draw the graph of line three curves between 60 and 72 haircuts.

To determine

The average total cost, average variable cost and marginal cost of producing 60 to 72 haircuts and to draw the graph of the three curves between 60 and 72 haircuts.

Explanation

Due to the change in the cost of production from 60 to 72 haircuts, the average total cost will be calculated as the ratio of total cost and quantity.

Initially, for 60 haircuts,

Average total cost (ATC) will be calculated as below:

ATC=TCQ       = 40060       =6.67

Average variable cost (AVC) is calculated as below:

AVC=TVCQ       = 24060       =4

Marginal cost (MC) is calculated as below:

MC=change in TVCchange in Q       = ( 400320)( 6040)       =4

Now, for 72 haircu

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