Table 9-1
$\begin{array}{|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$ Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 9-1.What is the fixed cost of production?

Question

Table 9-1
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$ Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 9-1.What is the fixed cost of production?

Quizplus · Accepted Answer

Fixed cost is the cost that does not vary with the level of output. Since the variable cost increases as output increases, the difference between the total cost and variable cost at every level of output represents the fixed cost. In this case, the fixed cost is $1000, which is the total cost at zero output.

The best choice(s) cannot be determined from the information given. It would depend on the market price of plastic camera cases and the firm's revenue at each level of output. If the market price is above the firm's average variable cost (i.e. the additional cost of producing one more unit), then the firm should continue to produce as long as it can cover its fixed cost. However, if the market price is below the firm's average variable cost, then the firm should shut down in the short run and incur a loss equivalent to its fixed cost.

Table 9-1 Table 9-1 Shows the Short-Run Cost Data of a Perfectly