Post by: nummyann on May 24, 2019
The above table gives the total cost schedule for oil changes at the local Jiffy Lube.
| a. | What is Jiffy Lube's total fixed cost? |
| b. | What is the total variable cost of 2 oil changes? |
| c. | What is the average variable cost of 4 oil changes? |
| d. | What is the average fixed cost of 2 oil changes? |
| e. | What is the marginal cost of the 3rd oil change? |
Post by: spencer.martell on May 24, 2019
b. The total variable cost of 2 oil changes is $25. The total cost, TC, is $35 and from part (a) the total fixed cost, TFC, is $10. The total variable cost, TVC, is equal to TC - TFC or $35 - $10 = $25.
c. The average variable cost for 4 oil changes is $17.50. Start similarly to part (b) by calculating that the total variable cost, TVC, for 4 oil changes is $70. Then, the average variable cost, AVC, equals the total variable cost divided by output, or TVC ÷ Q. In this case, the AVC is equal to $70 ÷ 4 = $17.50.
d. The average fixed cost of 2 oil changes is $5. The average fixed cost, AFC, equals the total fixed cost divided by output, or TFC ÷ Q. From part (a), the total fixed cost is $10, so the average fixed cost equals $10 ÷ 2 = $5.
e. The marginal cost is $15. Marginal cost is defined as the change in the total cost that results from a one-unit increase in output. The total cost of 2 oil changes is $35 and the total cost of 3 oil changes is $50. Therefore the change in the total cost is $15, which is the marginal cost.
Post by: nummyann on May 24, 2019
Post by: spencer.martell on May 24, 2019
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