I am in first year university microeconomics and I am stuck on the parts about marginal cost, average fixed cost and average variable cost. I don't really understand the concepts and how to find them. Here's an example: Units of Output: Total Cost: 0 5 1 11 2 16 3 20 4 23 5 25 6 26 7 28 8 31 9 35 10 40 Refer to the table above. The average fixed cost of producing 5 units of output is? the answer is 1... why? Refer to table above. The average variable cost of producing 10 units is? the answer is 3.5... why?
0 5 1 11 2 16 3 20 4 23 5 25 6 26 7 28 8 31 9 35 10 40 add up the differences (5, 6, 5, 4...) in the left column and divide by 10 you get 3.5, this would be the ave. variable cost i think i dunno how to do average fixed cost.. its been like 2 years since microecon
even thought some1 has already explained this.. this is just a basic maths questions. i dont mean to be rude or anything. its just the way i talk. i will try and explain and hope u understand. 1) Why is average fixed cost for first 5 units 1? well its obvious i think. First step. what is average fixed cost? well fixed cost is the cost incurred regardless of output. from the table u see that fixed cost is 5. even if u produce nothing it will still cost u 5. now u know what the fixed cost is. Therefore, the average fixed cost is fixed/no of units. So the average fixed cost over 5 units is simply the fixed cost divided by 5. therefore 5/5 = 1. 2)Some has already answered this but again the answer is striaght forward. Define variable cost and average variable cost. well variable cost is the the cost incurred as u produce more and more (definition is probably not that great).. Well u know that total cost of producing 10 is 40 and u know that fixed cost is 5. therefore Total variable cost for 10 units is 35 (40 - 5). so since average variable cost is just total variable cost/ no of units. its just 35/10 which is 3.5 note that total cost=total fixed cost+ total variable cost.
