# Unit 7: fixed costs and variable costs- templete

1. The accompanying table shows a car manufacturer’s total cost of producing cars.

 Quantity of cars Total Cost 0 \$500,000 1 \$540,000 2 \$560,000 3 \$570,000 4 \$590,000 5 \$620,000 6 \$660,000 7 \$720,000 8 \$800,000 9 \$920,000 10 \$1,100,000

a.What is this manufacturer’s fixed cost?

b.For each level of output except zero output, calculate this manufacturer’s marginal cost (MC).

c. For each level of output except zero output, calculate the variable cost (VC).

d. For each level of output except zero output, calculate the average variable cost (AVC),

e. For each level of output, calculate the average total cost (ATC),

f. For each level of output except zero output, calculate the average fixed cost (AFC).

 Quantity of cars Total Cost Marginal Cost b. Variable Cost c. Average Variable Cost d. Average Total Cost e. Average Fixed Cost f. 0 \$500,000 — — — — — 1 \$540,000 2 \$560,000 3 \$570,000 4 \$590,000 5 \$620,000 6 \$660,000 7 \$720,000 8 \$800,000 9 \$920,000 10 \$1,100,000

g. What number of cars is the manufacturer’s minimum cost output level?

2. You produce widgets. Currently you produce 4 widgets at a total cost of \$40.

a. What is your average total cost?

b. Suppose you could produce one more (the fifth) widget at a marginal cost of \$5.  If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?

c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of \$20. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?

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References:

 Unit  _7_  Practice Assignment Grading Rubric Content Percent Possible Points Possible Full assignment 100% 40 Overall Writing: 20% 8 correct coversheet information at the top of 1st page 5% 2 APA format for answers 3% 1 correct citations 3% 1 standard English no errors 4% 2 At least ONE, or more, references 5% 2 Answers:  provides complete information demonstrating analysis and critical thinking: 80% 32 Individual Questions: Calculate this manufacturer’s fixed cost 8% 3 1. b. – Calculate this manufacturer’s marginal cost. 8% 3 1. c. – Calculate this manufacturer’s variable cost. 8% 3 1. d. – Calculate this manufacturer’s average variable cost. 8% 3 1. e. – Calculate this manufacturer’s average total cost. 8% 3 1. f. – Calculate this manufacturer’s average fixed cost 8% 3 1. g. – Identify this manufacturer’s minimum cost output level. 8% 3 2. a. – What is your average cost? 8% 3 2. b. – What is the average total cost of 5th widget, (marginal cost of \$5) why has it changed? 8% 3 2. c. – What is the average total cost of 5th widget, (marginal cost of \$20) why has it changed? 8% 3

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