Cost Structure of the Firm

Use the short run given  output and total cost figures
for an individual firm to complete all four problems.

Output            Total Cost

0                 $  1,000
1                 $  1,700
2                 $  2,000
3                 $  2,200
4                 $  2,500
5                 $  3,000
6                 $  3,700
7                 $  4,700
8                 $  6,000
9                 $  7,800
10                 $ 10,000

1.  From the information given above, calculate  the
total fixed cost and total variable cost for each
output level.  (2 points)

2.  From the data that you calculated in Problem # 1,
determine  the average total cost, average
variable cost,  average fixed cost and marginal
cost for each output level given above.  (2 points)

3.  Explain why the marginal cost function intersects
both the average total cost and average variable
cost functions at their minimum points if the data
in the model were graphed.   (3 points)

4.  Explain why the average fixed cost function continues
to decline as output is increased if the data in the
model were graphed.   (3 points)

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