Units Of Output TFCTVCTCMCAFCAVC 0 1 2 3 4 5 46 1304 20 10 18 Marginal Cost Puzzle 20.

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Presentation transcript:

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle 20

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle 20 Step 1 : AFC * Q = TFC. TFC never changes. So 4 x 5 = 20 = TFC 20

Step 2: AVC x Q = TVC So, 18 x 4 = 72 and 10 x 1 = 10 Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle Step 3: TVC at quantity of zero is 0, because no variable inputs needed Step 4: MC = Change in TC / Change in Q. But, Change in Q = 1, So, TC = 66 at an output of 3, since MC = 20 between outputs 2 and

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle Step 5 : TFC + TVC = TC, so working down the first three columns, fill in all of TC and TVC

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle Step 6 : Use definition of MC to fill in column MC = Change in Costs / Change in Quantity

Units Of Output TFCTVCTCMCAFCAVC Marginal Cost Puzzle Step 7 : Use AFC and AVC definitions to fill in Table. AFC x Q = TFC AVC x Q = TVC NR