A firm faces the following table of costs for various levels of production, if they can sell their product for Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost Q 0 10 9 2.00 11.00 2.00 30 3.00 1.00 4.00 0.50 45 2.00 1.11 3.11 1.33 55 1.64 1.29 2.93 2.10 If the firm can sell their product for $1.33 they will [Select] short-run and [Select] V in the long run. in the

Return to Figure 7.7. What is the marginal gain in output from increasing the number of batters from 4 to 5 and from 5 to 6? Does it continue the pattern of diminishing marginal returns? Figure 7.7 How output Affects Total costs

A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.

How does fixed cost affect marginal cost? Why is this relationship important?