Calculate different costs.

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Chapter 9, Problem 5RQ

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Calculate different costs.

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Situation 21-1 Diane's Donuts will begin selling donuts next week. Diane figures that the average variable cost to make each donut will be constant at $0.30. She has already paid $20,000 for the donut-making machinery and one year's rent. Refer to Situation 21-1. What will Diane's total variable costs be if she sells 36,500 donuts in one year? $10,950 O $18,450 $22,080 $12,500

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3. A firm has a total fixed cost of $60 and total variable costs as indicated in the table. Complete the table and check your cal- culations by referring to problem 4 at the end of Chapter 10. L09.3 a. Graph total fixed cost, total variable cost, and total cost. Explain how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves. b. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relation- ships to one another. Specifically, explain in nontechnical terms why the MC curve intersects both the AVC and the ATC curves at their minimum points. C. Explain how the location of each curve graphed in question 3b. would be altered if (1) total fixed cost is $100 rather than $60 and (2) total variable cost is $10 less at each level of output.