Table 14-9[table]
Labor(Number of workers) | Output(Units) | Fixed Cost(Dollars) | Variable Cost(Dollars) 0 | 0 | 30 | 0 1 | 100 | 30 | 15 2 | 180 | 30 | 30 3 | 240 | 30 | 45 4 | 280 | 30 | 60 5 | 300 | 30 | 75
[/table]Refer to Table 14-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is

Question

Table 14-9[table]
Labor(Number of workers) | Output(Units) | Fixed Cost(Dollars) | Variable Cost(Dollars) 0 | 0 | 30 | 0 1 | 100 | 30 | 15 2 | 180 | 30 | 30 3 | 240 | 30 | 45 4 | 280 | 30 | 60 5 | 300 | 30 | 75
[/table]​Refer to Table 14-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is

BlackTom AI · Accepted Answer

To evaluate the average-variable-cost (AVC) curve, we focus on AVC, which is defined as total variable cost divided by total output (AVC = VC / Q). From the table, the fixed cost does not affect AVC, since AVC uses only variable cost and output.

Compute AVC at each positive level of labor:
- At 1 worker: VC = 15, Output Q = 100, so AVC = 15/100 = 0.15.
- At 2 workers: VC = 30, Q = 180, so AVC = 30/180 = 0.1667 (approximately 0.167).
- At 3 workers: VC = 45, Q = 240, so AVC = 45/240 = 0.1875.
- At 4 workers: VC = 60, Q = 280, so AVC = 60/280 ≈ 0.2143.
- At 5 workers: VC = 75, Q = 300, so AVC = 75/300 = 0.25.

Observing these AVC values, they rise as output increases from 100 to 300 units. Each additional unit of output is achieved with a relatively larger increment in VC, causing AVC to climb rather than fall.

Key point: the fixed cost of 30 dollars does not affect the AVC calculation, since AVC ignores fixed costs by definition. The trend is driven entirely by how VC grows with Q.

Therefore, the AVC curve is increasing over the given range, because AVC values are rising with higher output levels. This rules out any interpretation that AVC is constant or decreasing over these output levels.

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