merged

Quantity TC MC AFC AVC ATC
0 240 X X X X
1 300 60 240 60 300
2 ____ ____ 120 ____ 190
3 480 ____ 80 ____ ____
4 ____ ____ 60 90 ____
5 ____ 140 48 ____ ____
6 ____ ____ 40 ____ 150
At a quantity of two, the ATC is 190. The formula for computing ATC (ATC = TC ÷ Q) can be
adjusted to solve for TC. The formula would now be TC = ATC x Q. Thus, TC at a quantity of two
is 190 x 2 = 380. MC is the increase in TC. So if the TC of two units is 380 and the TC of one unit
is 300, the MC of unit two must be 80. AVC can be calculated as before: If AFC = 120 and ATC =
190, AVC must equal 70. The table below is updated for the newly calculated costs at a quantity
of two.
Quantity TC MC AFC AVC ATC
0 240 X X X X
1 300 60 240 60 300
2 380 80 120 70 190
3 480 ____ 80 ____ ____
4 ____ ____ 60 90 ____
5 ____ 140 48 ____ ____
6 ____ ____ 40 ____ 150
At a quantity of three, the TC is 480. MC is the increase in TC. So if the TC of three units is 480
and the TC of two units is 380, the MC of unit three must be 100. ATC = TC ÷ Q. If TC is 480 and
Q is 3, ATC is 160. AVC can be calculated as before: If AFC = 80 and ATC = 160, AVC must be
80. The table below is updated for the newly calculated costs at a quantity of three.
Quantity TC MC AFC AVC ATC
0 240 X X X X
1 300 60 240 60 300
2 380 80 120 70 190
3 480 100 80 80 160
4 ____ ____ 60 90 ____
5 ____ 140 48 ____ ____
6 ____ ____ 40 ____ 150
At a quantity of four, AFC = 60 and AVC = 90, thus ATC must be 150. If ATC = 150, TC (ATC x
Q) must be 600. If the TC of four units is 600 and the TC of three units is 480, the MC of unit four
must be 120. The table below is updated for the newly calculated costs at a quantity of four.
Quantity TC MC AFC AVC ATC
0 240 X X X X
1 300 60 240 60 300
2 380 80 120 70 190
3 480 100 80 80 160
4 600 120 60 90 150
5 ____ 140 48 ____ ____
6 ____ ____ 40 ____ 150
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
20 - 7 Production and Costs