Question

Suppose the imaginary company of Athena is a small, Rochester-based American apparel manufacturer specializing in athleisure. The following table presents the brand's total cost of production at several different quantities. Fill in the remaining cells of the following table.

Quantity Total Cost Marginal Cost Fixed Cost Variable Cost Average Variable Cost Average Total Cost
(pairs) (dollars) (dollars) (dollars) (dollars) (dollars per pair) (dollars per pair)
0 120 0 –– 90 –– ––
1 210 –– –– 60 –– ––
2 270 –– –– 45 –– ––
3 315 –– –– 105 –– ––
4 380 –– –– 95 –– ––
5 475 –– –– 95 –– ––
6 630 –– –– 105 –– ––

On the following graph, plot Douglas Fur's average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is 210, so you should start your ATC curve by placing a green point at (1, 210). For MC, plot the points between the integers: for example, the MC of increasing production from zero to one pair of boots is 90, so you should start your MC curve by placing an orange square at (0.5, 90).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

ATC AVC MC
0 1 2 3 4 5 6
240 210 180 150 120 90 60 30

Costs (dollars per pair)
Quantity (pairs of boots)

Answer 1

The question explores how Athena, an imaginary apparel company, decides on production levels based on costs and revenues, and provides examples of calculating these metrics including total revenue, total cost, average cost, and marginal cost.

Step-by-step explanation:

The question presented requires filling in a table with information about the costs and revenues related to an apparel company's production levels. To address this, we refer to the concepts of total revenue, total cost, average cost, and marginal cost. One example given states that when the company, Athena, produces five units of athleisure and sells them at $25 per unit, it has total revenues of $125 and total costs of $130, resulting in a loss of $5. Another key detail is that the company experiences losses if the price is lower than the average cost; in the case of Athena, with an average cost of $26 per unit and a selling price of $25 per unit, the firm incurs losses. In production, marginal costs play a significant role, and when they exceed the price per unit, it indicates that the firm should decrease its production to minimize losses.

Similarly, the table for WipeOut Ski Company should include figures for total cost, average variable cost, average total cost, and marginal cost, considering the fixed costs of $30. The discussion of economies of scale in producing toaster ovens or computing systems also relates to the company's production costs and efficiency gains or losses at varying levels of output.