Question

Suppose that your colleague has accidentally spilled coffee on his laptop and the file containing your firm\'s cost data has been damaged. Use your knowledge of cost functions to save the day (and your friend\'s job) by determining the missing cost data. (Source Sapling Learning) Cost Schedule Output Marginal Cost Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost 0 ----- ------- ----- ---- 1 $50 2 $74 3 $105 4 $50 $360 The total cost when producing zero units of output is $___________.Please only input the numerical answer without the $ sign. If your answer is $400 please input 400.

Answer 1

The total cost at zero production is the fixed costs. Referring to the example of The Clip Joint barber shop, where fixed costs are $160 per day, we infer that this would be the total cost at zero production for any business in a similar scenario.

Step-by-step explanation:

The total cost when producing zero units of output is essentially the fixed costs, since there are no variable costs incurred at that level of production. Drawing from the provided example of The Clip Joint barber shop, we understand that fixed costs are the costs that do not change, regardless of the level of production. Hence, at zero production, the total cost would be equal to the fixed costs alone.

According to the details given in the scenario with the barber shop, where the fixed costs amount to $160 per day, we can determine that this is also the case for the laptop spill scenario. The fixed costs represent the vertical intercept of the total cost curve, which is the cost incurred when output is zero.

Therefore, even though the file with cost data has been damaged, using the knowledge of cost functions and the example of The Clip Joint, the fixed costs can be extracted.

Answer 2

Q MC FC VC TC AFC AVC ATC

0 NA 50 0 50 NA NA NA

1 50 50 50 105 50 50 105

2 19 50 64 104 20 32 52

3 85 40 149 189 13.33 49.67 63.00

4 223 40 372 412 10 93 103

TC=FC+VC

FC=40

VC=TC-FC

MC=change in TC

AFC=FC/Q

AVC=VC/0

ATC=TC/0

a) TC when 0=0 = 40 because FC = 40 remains constant and the firm still incurs a total cost equal to its FC when it produces zero output.

b) MC for first unit = 45

c) ATC of 3rd unit = 63

d) AVC for 4th unit = 93