A firm has $60 of fixed costs, and variable costs as indicated in the table below.

A firm has $60 of fixed costs, and variable costs as indicated in the table below.
Total product Total fixed cost Total variable cost Total cost AFC AVC ATC Marginal cost
0 $60 $0 $60
1 $60 $45 $105 $60.00 $45.00 $105.00 $45.00
2 $60 $85 $145 $30.00 $42.50 $72.50 $40.00
3 $60 $120 $180 $20.00 $40.00 $60.00 $35.00
4 $60 $150 $210 $15.00 $37.50 $52.50 $30.00
5 $60 $185 $245 $12.00 $37.00 $49.00 $35.00
6 $60 $225 $285 $10.00 $37.50 $47.50 $40.00
7 $60 $270 $330 $8.57 $38.57 $47.14 $45.00
8 $60 $325 $385 $7.50 $40.63 $48.13 $55.00
9 $60 $390 $450 $6.67 $43.33 $50.00 $65.00
10 $60 $465 $525 $6.00 $46.50 $52.50 $75.00
a. Graph total fixed cost, total variable cost, and total cost. Explain how the law of diminishing returns influences the shapes of the total variable-cost and total-cost curves.
b. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relationships to one another. Specifically, explain in nontechnical terms why the MC curve intersects both the AVC and ATC curves at their minimum points.
c. Explain how the locations of each of the four curves graphed in question 9b would be altered if (1) total fixed cost had been $100 rather than $60, and (2) total variable cost had been $10 less at each level of output.


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