8/3/2019 Micro Ch13 ICA Cost

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Name: ___________________________________________ Economics Dr. Katie Sauer

Cost (ch 13)

1. Your cousin Vinnie owns a painting company with fixed costs of $200 and the following variablecosts:Number of Houses TotalPainted per Month Variable Costs

1 $10

2 $203 $404 $805 $1606 $3207 $640

a. Calculate Average Total Cost.b. What is the efficient scale for this painting company?

2. Teachers Helper is a small company that has a subcontract to produce instructional materials fordisabled children in public school districts. The owner rents several small rooms in an office building inthe suburbs for $600 a month and has leased computer equipment that costs $480 a month.

Complete the following table.

Output

(Instructional

Modules per

Month)

Fixed

Costs

Variable

Costs

Total Cost

Average

Fixed

Cost

Average

Variable

Cost

Average

Total

Cost

Marginal

Cost

0

1 400 1,480 400

2 965 450

3 1,350 2,430

4 1,900 475

5 2,500 216

6 1,080 4,280 7007 4,100

8 5,400 135

9 7,300

10 10,880 980

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3. You are thinking of setting up a lemonade stand. The stand itself costs $200 and the ingredients foreach gallon of lemonade cost $8.

a. Complete the following table.

gallonsfixedcost

variablecost

totalcost

averagefixed cost

averagevariable cost

averagetotal cost

marginalcost

0

12

3

4

5

6

7

8

9

10

b. Graph the cost curves on the axis below.

TC, TVC,TFC

0 1 2 3 4 5 6 7 8 9 10 Q 0 1 2 3 4 5 6 7 8 9 10 Q

ATC,AVC,AFC,MC