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AVC,AFC,ATC,MC, At what level Mark & Jeff's average total cost minimized?

Mark and Jeff operate a small company that produces souvenir footballs. Their fixed cost is $2,000 per

month. They can hire workers for $1,000 per worker per month. Their monthly production function for footballs

is as given in the accompanying table.

Quantity of labour(workers) / Quantity of footballs

0 0

1 300

2 800

3 1200

4 1400

5 1500

i. For each quantity of labor, calculate average variable cost (AVC), average fixed cost (AFC), average total

cost (ATC), and marginal cost (MC).

ii. At what level of output is Mark and Jeff’s average total cost minimized?

1 Answer

Relevance
  • 10 years ago
    Favorite Answer

    Quantity

    Output of

    of labor

    footballs

    AFC

    AVC

    ATC

    MC

    0

    0

    1

    300

    $6.67

    $3.33

    $10.00

    $3.33

    2

    800

    $2.50

    $2.50

    $5.00

    $2.00

    3

    1,200

    $1.67

    $2.50

    $4.17

    $2.50

    4

    1,400

    $1.43

    $2.86

    $4.29

    $5.00

    5

    1,500

    $1.33

    $3.33

    $4.67

    $10.00

    b. The accompanying diagram shows the AVC, ATC, and MC curves.

    c. According to the table, Mark and Jeff’s average total cost is minimized at 1,200

    footballs per month, where the ATC is $4.17.

    200 400 600 800 1,000 1,200 1,400 1,600

    0

    $10

    8

    6

    4

    2

    Cost of

    football

    Quantity of footballs

    MC

    ATC

    AVC

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