6. If the FC = $200, the VC of the 9th unit is $400, and the...

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Question

business economics

Answer 1

Answer #1

Option D.

Given that FC = $200, VC at 8th unit = $300 and VC at 9th unit = $400.

Then we can calculate the TC at 8th unit as,

TC = FC + VC = 200 + 300 = $500 ----(1)

We now Calculate the TC at 9th unit as,

TC = FC + VC = 200 + 400 = $600 ------(2)

Next we need to find the ATC at 9th unit as,

ATC = TC/ number of units = 600/9 = $66.6----(3)

Then the MC at 9th unit = $600 - $500 = $100 ---(4)

Comparing equation (3) and (4) we can see that MC is greater than ATC at 9th unit.

Similarly we need to find the ATC and MC at the 10th unit.

As we can see from equations (1) and (2) the TC is increasing constantly.

Hence we can assume the TC of 10th unit to be, TC = $700.

Then ATC at 10th unit = $700/10 = $70----(5)

MC at 10th unit = $700 - $600 = $100 ------(6)

Comparing equation (5) and (6), we can see that MC is greater than ATC at the 10th unit.

Therefore we can conclude that the MC curve is above the ATC curve at the 10th unit.

Answer 2

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