SOLUTION TO ECN834 PRACTICE PROBLES

[1]

Given the table;

Output 0 1 2 3 4 5 6
Total Cost (₦) 2 24 2 33 4 50 66
1 8 0
Marginal Cost (₦)
Average Cost (₦)

ΔTC ΔVC
Marginal Cost = ΔQ = ΔQ

From the table, where output is changed from 0 to 1 total cost changed from 21

to 24, therefore the marginal cost (MC) is;

ΔTC 24−21 3
Marginal Cost (MC) = ΔQ = 1−0 = 1 = 3.

Total Cost(TC )
Average Cost =
Output

From the table, when output is zero the total cost is 21 therefore, the average

cost (AC) at that point is;

Total Cost(TC ) 21
AC = = 0 = 0.
Output

Also, where output is 1, total cost (TC) is 24 thus, average cost at that point is;

Total Cost (TC ) 24

Average Cost (AC) = = 1 = 24.
Output
Repeating the calculations for the giving values of the table gives us the table

below.

Output 0 1 2 3 4 5 6
Total Cost (₦) 2 24 2 33 4 50 66
1 8 0
Marginal Cost (₦) 0 3 4 5 7 10 16
Average Cost (₦) 0 24 1 11 1 10 11
4 0