AB224 Unit 7 Assignment Template:
Name: –
Course Number:– AB224
Section Number:– 2
Unit Number:– 7
Date:–
———————————- General Instructions for all Assignments———————————–
1. Unless specified differently by your course instructor, save this assignment template to your computer with the following file naming format:
Course number_section number_LAST_FIRST_unit number
2. At the top of the template, insert the appropriate information: Your Name, Course Number, Section Number and Date
3. Insert your answers below, or in the appropriate space provided for in the question. Your answers should follow the APA format with citations to your sources and, at the bottom of your last page, a list of references. Your answers should also be in Standard English with correct spelling, punctuation, grammar, and style (double spaced, in Times New Roman, 12-point, black font). Respond to questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions.
4. Provide a list of references at the end of the last page of your assignment.
5. Upload the completed assignment to the appropriate dropbox.
6. Any questions about the assignment, or format questions, should be directed to your course instructor.
——————————————- Career Competencies —————————————–
In this assignment, you will engage in developing the following career competencies:
Analyzing Quantitative Data
Analyzing Qualitative Data
——————————————- Assignment ——————————————-
1. The accompanying table shows a car manufacturer’s total cost of producing cars.
| Quantity of cars | Total Cost |
|---|---|
| 0 | $500,000 |
| 1 | $540,000 |
| 2 | $560,000 |
| 3 | $570,000 |
| 4 | $590,000 |
| 5 | $620,000 |
| 6 | $660,000 |
| 7 | $720,000 |
| 8 | $800,000 |
| 9 | $920,000 |
| 10 | $1,100,000 |
What is this manufacturer’s fixed cost? (Don’t forget this question. Some students don’t see it.)
Ans. $500,000 is fixed cost
b. For each level of output except zero output, calculate this manufacturer’s marginal cost (MC).
c. For each level of output except zero output, calculate the variable cost (VC).
d. For each level of output except zero output, calculate the average variable cost (AVC),
e. For each level of output, calculate the average total cost (ATC),
f. For each level of output except zero output, calculate the average fixed cost (AFC).
| Quantity of cars | Total Cost | Marginal Cost | Variable Cost | Average Variable Cost | Average Total Cost | Average Fixed Cost |
|---|---|---|---|---|---|---|
| b. | c. | d. | e. | f. | ||
| 0 | $500,000 | — | — | — | — | — |
| 1 | $540,000 | $40,000 | $40,000 | $40,000 | $540,000 | $500,000 |
| 2 | $560,000 | $20,000 | $60,000 | $30,000 | $280,000 | $250,000 |
| 3 | $570,000 | $10,000 | $70,000 | $23,333 | $190,000 | $166,667 |
| 4 | $590,000 | $20,000 | $90,000 | $22,500 | $147,500 | $125,000 |
| 5 | $620,000 | $30,000 | $120,000 | $24,000 | $124,000 | $100,000 |
| 6 | $660,000 | $40,000 | $160,000 | $26,667 | $110,000 | $83,333 |
| 7 | $720,000 | $60,000 | $220,000 | $31,429 | $102,857 | $71,429 |
| 8 | $800,000 | $80,000 | $300,000 | $37,500 | $100,000 | $62,500 |
| 9 | $920,000 | $120,000 | $420,000 | $46,667 | $102,222 | $55,556 |
| 10 | $1,100,000 | $180,000 | $600,000 | $60,000 | $110,000 | $50,000 |
g. What number of cars is the manufacturer’s minimum cost output level?
Ans. 8 cars should be manufactured because there is lowest average total cost (Hirschey, 2008).
2. You produce widgets. Currently you produce 4 widgets at a total cost of $40.
a. What is your average total cost?
Ans. Average total cost =$40/4 = $10
b. Suppose you could produce one more (the fifth) widget at a marginal cost of $5. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?
Ans. Total Cost = $40+$5 , if 5th widget is produced, So new average cost is = $45/5 = $9. Average cost is reduced because marginal cost of 5th product is less than average cost.
c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, what will your average total cost be? Has your average total cost increased or decreased? Why?
Ans.
Total Cost = $40+$20 , if 5th widget is produced, So new average cost is = $60/5 = $12. Average cost is increased because marginal cost of 5th product is more than average cost (Hirschey, 2008).
——————————————–
References:
Hirschey, M. (2008). Fundamentals of Managerial Economics. Cengage Learning.
| Content | Percent Possible | Points Possible |
|---|---|---|
| Full assignment | 100% | 40 |
| Overall Writing: | 20% | 8 |
| correct coversheet information at the top of 1st page | 2 | |
| APA format for answers | 1 | |
| correct citations | 1 | |
| standard English no errors | 2 | |
| At least ONE, or more, references | 2 | |
| Answers: provides complete information demonstrating analysis and critical thinking: | 80% | 32 |
| Individual Questions: | ||
| 1. a. – Calculate this manufacturer’s fixed cost | 4 | |
| 1. b. – Calculate this manufacturer’s marginal cost. | 3 | |
| 1. c. – Calculate this manufacturer’s variable cost. | 3 | |
| 1. d. – Calculate this manufacturer’s average variable cost. | 3 | |
| 1. e. – Calculate this manufacturer’s average total cost. | 3 | |
| 1. f. – Calculate this manufacturer’s average fixed cost | 3 | |
| 1. g. – Identify this manufacturer’s minimum cost output level. | 4 | |
| 2. a. – What is your average cost? | 3 | |
| 2. b. – What is the average total cost of 5th widget, (marginal cost of $5) why has it changed? | 3 | |
| 2. c. – What is the average total cost of 5th widget, (marginal cost of $20) why has it changed? | 3 |
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