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3 September, 06:33

When Ajax Co. produced 3 units of output per week, its total fixed cost was $100 and total variable cost was $45. When output increased to 4 units per week, total fixed cost remained at $100 and total variable cost increased to $70. a. When output was 4 units per week, total cost was $___.

b. When output was 4 units per week, average variable cost was $___.

c. When output was 4 units per week, average fixed cost was $___.

d. When output was 4 units per week, average total cost was $___.

e. The marginal cost of producing the fourth unit was $___.

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  1. 3 September, 06:59
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    (a) $170

    (b) $17.5

    (c) $25

    (d) $42.5

    (e) $25

    Explanation:

    Given that,

    At the production level of 3 units,

    Total fixed cost = $100

    Total variable cost = $45

    At the production level of 4 units,

    Total fixed cost = $100

    Total variable cost = $70

    (a) When output was 4 units per week,

    Total cost = Total fixed cost + Total variable cost

    = $100 + $70

    = $170

    (b) When output was 4 units per week,

    Average variable cost = Total variable cost : Number of units

    = $70 : 4

    = $17.5

    (c) When output was 4 units per week,

    Average fixed cost = Total fixed cost : Number of units

    = $100 : 4

    = $25

    (d) When output was 4 units per week,

    Average total cost = Total cost : Number of units

    = $170 : 4

    = $42.5

    (e) Total cost at production level of 3 units:

    = Total fixed cost + Total variable cost

    = $100 + $45

    = $145

    Marginal cost of producing the fourth unit:

    = Total cost at production level of 4 units - Total cost at production level of 3 units

    = $170 - $145

    = $25
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