Given the total cost schedule below, at what level of output is the average cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | }
\hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \
\hline \text { Total Cost } & 50 & 70 & 60 & 70 & 80 & 110 & 140 \
\hline
\end{array}$$
A) 2
B) 3
C) 4
D) 5

Question

Given the total cost schedule below, at what level of output is the average cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \
\hline \text { Total Cost } & 50 & 70 & 60 & 70 & 80 & 110 & 140 \
\hline
\end{array}$$
A) 2
B) 3
C) 4
D) 5

Quizplus · Accepted Answer

To find the level of output where the average cost is the lowest, we calculate the average cost for each level of output (excluding output 0, as it would result in division by zero). The average cost (AC) is calculated by dividing the total cost (TC) by the quantity (Q), i.e., AC = TC/Q.1. For Q = 1, AC = 70/1 = 702. For Q = 2, AC = 60/2 = 303. For Q = 3, AC = 70/3 ≈ 23.334. For Q = 4, AC = 80/4 = 205. For Q = 5, AC = 110/5 = 226. For Q = 6, AC = 140/6 ≈ 23.33The lowest average cost occurs at an output level of 4, making the correct answer C.

Given the Total Cost Schedule Below, at What Level of Output