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Engle sells chess sandwiches. The cost of ingredients (bread, meat, spices, etc.) to make a sandwich...

Engle sells chess sandwiches. The cost of ingredients (bread, meat, spices, etc.) to make a sandwich is $2. Engle pays her employees $60 per day. She also incurs a fixed cost of $120 per day. a) Calculate Engle's variable cost per day when she produces 50 sandwiches using two workers? b) Calculate Engle's average fixed cost per day when she produces 50 sandwiches using two workers? c) What is Engle's total cost per day when she does not produce any sandwiches and does not hire any workers?

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Answer #1

(a)

Total variable cost (TVC) = Ingredient cost x Q + Wage rate x Number of workers

= $2 x 50 + $60 x 2

= $100 + $120

= $220

(b)

Average fixed cost = Total fixed cost / Q

= $120 / 2

= $60

(c)

When Q = L = 0,

Total cost = Fixed cost = $120

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