Friday, March 02, 2007

Costs...

Consider the following costs for a pizzaria. They go in order of Q in dozens/TC/VC
0/$300/$0
1/$350/$50
2/$390/$90
3/$420/$120
4/$450/$150
5/$490/$190
6/$540/$240

a. What is the fixed cost? how do you know?

b. What is the marginal cost per dozen pizzas using TC? What is the marginal cost per dozen pizzas using VC? What is the relationship between the two?

11 comments:

D Mac said...

so, the fixed cost is $300. you can tell because when the pizzaria creates zero pizzas it still costs $300.

Wojtek said...

b) We see here a diminishing marginal cost up to 4 dozens of pizzas. The marginal cost of producing more than that is increasing. To produce one more dozen of pizzas (from 0 to 1) costs 50 in TC and 50 in VC.
The marginal cost per dozen pizzas using either TC or VC is the same. That means that the fixed cost doesn't influence the marginal cost.

Mary Hable said...

a. The fixed cost is $300 because that is the Total Cost and 0 Q.

b. The marginal cost between each dozen of pizzas is the same for TC and VC. Because the fixed cost stays the same, the only number that affects the total cost is the marginal variable cost.

keri said...

a. The fixed cost in this pizzaria is $300. Everytime the pizzaria makes zero pizzas it still has to pay (or it costs I guess would be more accurate) $300.
b. The marginal cost for every dozen of pizzas has the same TC and the same VC. The only thing that influences the TC is the Marginal VC, meaning that the fixed cost has no affect on marginal cost.
$300 is a pretty cheap fixed cost though considering they have to pay for the people who work and all of the bills.

rageena said...

Fixed cost is $300 because without making a product (Q=0), the cost is $300.

kfbare said...

I hope its okay that i just answer a... the fixed cost has to be $300 because when there aren't any pizzas produced the pizzaria still pays $300 for other costs.

Dan said...

Fixed cost would be 300$ because there is a 300$ cost at production of 0 pizzas.

Uh does fixed cost even touch marginal cost? Using VC, the price climbs slower as ingredients are apparently cheaper when bought in bulk.

Raveen Shah said...

a. The fixed cost is $300 because that is the total cost when the quantity of pizzas in dozens is zero.

KM said...

Oooh...you guys are GOOD! :)

Kate said...

a. the fixed cost is $300because total cost-VC=300

nick_oehlrich said...

The fixed a cost is $300 because that is the total costs a 0 Quantity.