Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the fixed input (the small stores rent) is not $200 but $250. A new lease may have caused the rent to increase.
I have created Table 1 for you to put your answers in. Assume the price of the variable input, labor, is still $50 per unit. When fixed costs change which other costs will increase? Compare the costs you calculate for table one to the costs calculated in the notes in chapter 7 to find the answer.
TABLE ONE FOR ANSWERS TO PROBLEM ONE
|
Units of Labor
|
Total
Product
(output)
|
FC
|
VC
|
TC
|
MC
|
ATC
|
AVC
|
AFC
|
|
0
|
0
|
|
|
|
|
|
|
|
|
1
|
3
|
|
|
|
|
|
|
|
|
2
|
7
|
|
|
|
|
|
|
|
|
3
|
12
|
|
|
|
|
|
|
|
|
4
|
16
|
|
|
|
|
|
|
|
|
5
|
19
|
|
|
|
|
|
|
|
|
6
|
21
|
|
|
|
|
|
|
|