Question

Question 2 In his old age, Ron Weasley considers going into business making and selling potions Five potions cost $800 to make, and ten potions cost $1150 to make. What are the fixed and variable costs of making thirteen potions? to erle 2 a lo asb td. bov 0 eanort

Answer 1

Answer: Fixed cost - $450 ; Variable cost - $910

In the short-run, the total cost is composed of fixed cost and variable cost. The fixed cost is fixed for all levels of output. The variable cost changes with the change in output.

Total cost = Fixed cost + Variable cost.

To produce 5 potions, Ron Weasly's total cost is $800.; and to produce 10 potions, Ron Weasly's total cost is $1150.

$\therefore$ The change in total cost when output changes from 5 units to 10 units is, $1150 - $800 = $350.

This is actually the change in variable cost, as the fixed cost remains fixed for all levels of output.

So, for 5 units of potion change, the variable cost changes by $350.

Now, we can say that for 5 units of potions, the variable cost is $350, and we know that for 5 units of potion, the total cost is $800.

So, the fixed cost is, $800 - $350 = $450

For 5 units of potions, the variable cost is $350,

So, for 1 unit potion, variable cost = $350 / 5 = $70

For, 13 potions, the variable cost = $70 * 13 = $910.

So, for making 13 potions, the fixed cost is $450, and the variable cost is $910.

The total cost(fixed cost + variable cost) for making 13 potions = $450 + $910 = $1360

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