Final answer:
Complete information from Table 7.16 is needed to calculate the average variable cost, total cost, average total cost, and marginal cost for the WipeOut Ski Company. To determine profits or losses for selling 5 units at $25 each, we must know total costs or variable costs per unit. A glance at the average total cost and marginal cost in comparison to the selling price can indicate profitability.
Step-by-step explanation:
The student's question involves a case where the WipeOut Ski Company manufactures skis with a fixed cost of $30. Unfortunately, without the rest of Table 7.16, particularly the variable costs and the quantity of skis produced, it's not possible to calculate the average variable cost, total cost, average total cost, and marginal cost.
For question 4, if the company produces 5 units and sells each for $25, then the total revenue is 5 units * $25/unit = $125. If we knew the total cost or the variable cost per unit, we could subtract the total costs from the total revenue to calculate the company's profits or losses. Without additional data from Exercise 7.3, this cannot be completed.
You can tell at a glance whether the company is making or losing money by comparing the selling price ($25) to the average total cost (ATC) of producing each unit. If ATC is less than $25, the company is making a profit; if it is more, the company is at a loss. As for whether the marginal unit is adding to profits, if the marginal cost (MC) of producing the fifth unit is less than the price of $25, then it is adding to profits. Otherwise, if MC is greater, it is not.