Question

When Ajax Co. produced 3 units of output per​ week, its total fixed cost was ​$100 and total variable cost was ​$45. When output increased to 4 units per​ week, total fixed cost remained at ​$100 and total variable cost increased to ​$70.a. When output was 4 units per week, total cost was $___.
b. When output was 4 units per week, average variable cost was $___.
c. When output was 4 units per week, average fixed cost was $___.
d. When output was 4 units per week, average total cost was $___.
e. The marginal cost of producing the fourth unit was $___.

Answer 1

Answer:

(a) $170

(b) $17.5

(c) $25

(d) $42.5

(e) $25

Explanation:

Given that,

At the production level of 3 units,

Total fixed cost = $100

Total variable cost = $45

At the production level of 4 units,

Total fixed cost = $100

Total variable cost = $70

(a) When output was 4 units per week,

Total cost = Total fixed cost + Total variable cost

                = $100 + $70

                = $170

(b) When output was 4 units per week,

Average variable cost = Total variable cost ÷ Number of units

                                     = $70 ÷ 4

                                     = $17.5

(c) When output was 4 units per week,

Average fixed cost = Total fixed cost ÷ Number of units

                                = $100 ÷ 4

                                = $25

(d) When output was 4 units per week,

Average total cost = Total cost ÷ Number of units

                               = $170 ÷ 4

                               = $42.5

(e) Total cost at production level of 3 units:

= Total fixed cost + Total variable cost

= $100 + $45

= $145

Marginal cost of producing the fourth unit:

= Total cost at production level of 4 units - Total cost at production level of 3 units

= $170 - $145

= $25