Question

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. Your fixed cost is $______, and your marginal cost is $______­­.

Answer 1

Fixed cost is $300

Marginal cost is $10.

Step-by-step explanation:

1) Fixed cost of production are constant, occur regularly, and do not change in the short-term with changes in production.

TC = FC + VC(Q)

FC = Fixed cost

TC = total cost

VC = variable cost

Q = quantity

Since TC = 300+ 10Q

Therefore, fixed cost is $300.

2)Marginal costs are defined as the overall change in price when a buyer increases the amount purchased by one unit.

Marginal cost = Change in total cost /change in quantity.

Marginal cost = ∆TC/ ∆Q

Since variable cost = marginal cost × quantity of products

Therefore from the given total cost,

TC = 300+ 10Q

marginal cost = $10.

Therefore, Fixed cost = $300 and,

Marginal cost = $10