Question

2. The following table shows the relevant information about cost Use the information to calculate the missing information; where: information about cost for a particular firm. L = Labor ; Q=Quantity produced / total product (TP) of labor TC = Total Cost; ATC = Average Total Cost; MC = Marginal Cost (4 points) TC ATC MC 0 200 4 240 60 14

Answer 1

(I) When Q = 4:

MC = Change in TC / Change in Q = (240 - 200) / (4 - 0) = 40/4 = 10

(II) When Q = 14:

MC = Change in TC / Change in Q

4 = (TC - 240) / (14 - 4)

4 = (TC - 240) / 10

TC - 240 = 40

TC = 280

(III) When Q = 14:

ATC = TC/Q = 280/14 = 20

(IV) When Q = 22:

MC = Change in TC / Change in Q

5 = (TC - 280) / (22 - 14)

5 = (TC - 280) / 8

TC - 280 = 40

TC = 320

(V) When Q = 22:

ATC = 320/22 = 14.55

(VI) When Q = 26, since none of TC, ATC and MC data are available, these cannot be calculated.