The total fixed cost (TFC) and total cost (TC) functions of a hypothetical firm are shown in the graph below. Study it and answer the questions that follow: (a) Determine the firm's (i) variable cost at output levels 2, 4 and 6 (ii) average total cost at output levels 2 and 3 (iii) marginal cost at output levels 4 and 6 (b) If the price of the firm's product is $40, calculate the firm's profit or loss when the following units are sold: (i) 2 units; (ii) 4 units
(b) (i) Profit = Total Revenue - Total Cost =TR-TC TR = Price x Quantity = P x Q When 2 units are sold, Profit = ($40 x 2) - $100 = $80 - $100 = -$20 (Loss) (ii) When 4 units are sold, Profit = ($40 x 4) - $140 = $160 - $140 = $20
