Question

To be clear, I ONLY NEED HELP WITH 3 and 4 a,b. I included the completed table to assist with the problem.

Table 1 shows the hourly production and Total Cost estimates for a new manufacturing firm wishing to enter the smartphone market.

Table 1

Smart cell phones produced in an hour	Total Cost (TC)	Variable Costs (VC) (2 points) a.	Average Variable Costs (AVC) (2 points) b.	Average Total Costs (ATC) (2 points) c.	Average Fixed Cost (AFC) (2 points) d.	Marginal Cost (MC) (3 points) e.
0	$3,200		n/a	n/a	n/a	n/a
15	$3,525	325	21.67	235	213.33	21.67
30	$3,875	675	22.50	129.17	106.67	23.33
45	$4,250	1050	23.33	94.44	71.11	25
60	$4,650	1450	24.17	77.50	53.33	26.67
75	$5,075	1875	25	67.67	42.67	28.33
90	$5,525	2325	25.83	61.39	35.55	30
105	$6,725	3525	33.57	64.05	30.47	80
120	$8,210	5010	41.75	68.42	26.67	99
135	$9,950	6750	50	73.70	23.70	116

3. Based on your calculations in completing the table in Question 2, what is this manufacturer’s minimum cost output level? Explain your answer.

4. According to textbook page 334, when one additional unit is produced, two factors directly impact the change in average total costs, the Spreading effect and the Diminishing Returns effect. In the following two situations, explain how the factors of the Spreading effect and the Diminishing Returns effect cause the average total cost to be different.

a. Production of the 10^th Gizmo resulted in an average total cost (ATC) of $20, but production of the 11^th Gizmo resulted in an average total cost of $22.

b. Production of the 10th Gizmo resulted in an average total cost (ATC) of $20, but production of the 11^th Gizmo resulted in an average total cost of $18.

Answer 1

3) Minimum cost output level is the level if output at which average total cost is lowest . It represents the u shaped point of the total cost curve. According to the calculation table here the min output level is 90 because producing 90 cellphones per hour needs the lowest total cost of 61.39

4) Spreading effect means the larger the output the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost. On the other diminishing returns effect means larger the output , the greater the amount of variable input required to produce additional units , leading to higher average variable cost. In the first case ATC rises from 20 to 22 due to diminishing marginal effect is more than spreading effect in the second case ATC falls from 20 to 18 due to spreading effect is more than diminishing effect