Question 1
The total fixed cost (TFC) and total cost (TC) functions of a hypothetical firm are shown in the graph below. Study it and answer the questions that follow:
(a) Determine the firm’s:
(i) variable cost at output levels 2, 4 and 6;
(ii) average total cost at output levels 2 and 3;
- marginal cost at output levels 4 and 6.
(b) If the price of the firm’s product is $40, calculate the firm’s profit or loss when the following units are sold:
(i) 2 units;
(ii) 4 units.
Observation