Bonus assignment (3%-5%)

Total marks 10

Q1.

a) Complete the following cost schedule by computing average fixed cost and average variable cost.
(5 marks)

Instructions: Enter your responses rounded to the nearest whole number.

 
Average Variable
Output Total Cost Average Fixed Cost
Cost
0 $600        -----           -----         
1   800        600 200
          
2 1,050        300 225
          
3 1,400        200 267
          
4 1,800        150 300
          
5 2,300        120 340
          

(b) Complete the following cost schedule by computing average total cost and marginal cost.

Instructions: Enter your responses rounded to the nearest whole number.

 
Output Total Cost Marginal Cost Average Total Cost
0 $600        -----           -----         
1   800        200 800
          
2 1,050        250 525
          
3 1,400        350 467
          
4 1,800        400 450
          
5 2,300        500 460
          

Draw the average costs along with the Marginal cost. Show the rate of output where there would be
minimum average costs.

BOTTOM OF THE DOCUMENT

Q2. Explain the concepts of explicit costs and implicit costs. Why do economists include implicit costs
in their calculation of profits? Give examples of explicit and implicit costs.(5 marks)

Implicit costs are nonmonetary opportunity costs, such as bringing on an intern, or income you may
receive from stocks if you were to sell your company. Explicit costs involve spending money on
tangible good or services, such as wages, equipment, rent, and utilities. Implicit costs account for
underutilized products and any loses incurred by not utilizing those resources. Profit is the revenue
generated subtracted from the expenses and the opportunity costs, and including implicit costs
allows economists better understand the depreciation of equipment and materials.