Chapter 59, Problem 2MCQ

To determine

To determine the total cost.

Answer to Problem 2MCQ

(d) $750.

Explanation of Solution

A firm’s total cost is the average cost of a good multiplied by the number of goods produced.

It can be written mathematically as

  

Where TC is total costs, ATC is average total costs, and Q is quantity sold. In the diagram,

ATC = $15 and, Q = 50

Hence, the total cost is $15×50 = $750.

The total cost is $750. Hence (d) is the right answer.

Options (a), (b), (c), and (e) are incorrect. $14 and $15 are various price and average total cost levels and are not total costs. Also, $460 is the total cost level while ATC is the lowest. However, it is not the profit-maximizing level of output. Similarly, $1000 is the total revenue earned by the sale of 50 units of the product and it is not the total cost level at the profit-maximizing level of output.

Economics Concept Introduction

Introduction:

Total cost of a firm is the overall production costs of a firm at the given level of production. It includes various expenses by the firm on the purchase of inputs of production such as land, labor, purchase of raw materials, etc. It includes all implicit and explicit costs of the firm.