The average variable cost of producing a backpack is $15.
The formula for calculating the variable cost per unit using the high/low method is:
y₂ : cost at highest level of activity
y₁ : cost at lowest level of activity
x₂ : number of units produced at highest level of activity
x₁ : number of units produced at lowest level of activity
Substituting the values from the question in the formula we get,
The correct answer is "D. nearly zero marginal cost; exceeds marginal cost".
Explanation: A cable company can add a subscriber for nearly zero marginal cost and a market failure occurs because the price charged exceeds marginal cost.
This happens because the cost of adding one more subscriber is almost nil.
One of the major advantages of service companies like a cable company is that apart from the initial set up cost , subsequent cost of production of services are always at minimal as they basically enlist a new customer on an existing platform of service provision.
We also need to know that market failure could arise as a result of abuse of power or position in a market economy. When the price charged by a service provider becomes too exorbitant , there is a threat of potential market failure.
$24 is the marginal cost of producing the third unit of output.
We know that the average variable cost of producing 3 units is 32, if we multiply 32 by 3 we get the total variable cost of producing 3 units. So 96 is the total variable cost of producing 3 units. Now we know that the marginal cost of producing the firs unit is 40 and the second unit is 32 so we can subtract (32+40) from 96 to find the marginal cost of the third unit.
1) a. $15
2) a. $50,000
July: n1 = 4,000; c1 =$110,000
January: n2 = 2,500; c1 =$87,500
1) Using the high/low method, the average variable cost is determine as the difference between the highest and lowest activity costs, divided by the difference between the highest and lowest output:
The average variable cost is $15.
2) The total fixed cost is determined by the highest activity cost (c1), subtracted by the product of the highest output and the variable cost (n1 x VC):
Total fixed cost is $50,000.
C. Shut down the presses printing my book
Since the average variable cost of producing the book is above the demand curve, the best course of action is to shut down the printing (production) of more books. The author would lose less money by shutting down operations rather than continuing production at a variable cost higher than the demand he's receiving for the books.
In economics, when profit is less than the average variable cost, firms are advised to stop production in the short run and incur economic loss on fixed inputs. This is because with continued operations, total revenue would not only be lower than total cost, but rather, would also be less than total variable cost.
Produce less outputs
Given:Marginal revenue is $30Marginal cost: $40
As we know that to maximize profit or minimize loss in the short run, the marginal cost must be equal to the marginal revenue or MC = MR
However, in this situation, the marginal revenue is smaller than the marginal cost so the firm should produce less outputs in an attempt to reduce the marginal cost
Hope it will find you well.
The average variable cost for producing 42 sneakers is $2.98 per unit.
We have, for 42 sneakers, the following costs:Fixed costs: $118Variable costs: $125
The total cost for 42 snickers is $243.
The average variable cost can be calculated dividing the total variable cost by the number of units.
This, for 42 snickers, is:
Fixed cost is a fixed amount regardless of the number of units created.
Variable cost is the amount that is directly related to the number of units. As the number of units produced increases, so does the variable cost.
These are the formulas I used in the table I made.
Total Cost = Fixed Cost + Variable Cost
Fixed Cost = Total Cost - Variable Cost
Variable Cost = Total Cost - Fixed Cost
Average Fixed Cost = Fixed Cost / Quantity output
Average Variable Cost = Variable Cost / Quantity output
Average Total Cost = Total Cost / Quantity output OR Ave. Fixed Cost + Ave. Variable Cost.
Marginal Cost = Change in Total Cost / Change in Quantity output