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Math Help - Production Costs

  1. #1
    Junior Member
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    Jun 2010
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    Production Costs

    I hope that this is in the right section....
    I am struggling and second guessing myself. Can someone help me if this is correct?

    OK everyone...I am doubting myself a little on this one can someone verify if this is correct? Thanks in advance.


    Firm XYZ is currently producing 50 units of output at an average cost of $18. Customer A is willing to offer Firm XYZ $220 to produce 5 more additional units. Firm XYZ's average variable cost and average fixed cost of producing 55 units is $20 and $2. Should Firm XYZ accept the offer?

    Q AC TC
    50 18 900
    55 22 1210

    AVC = 20, AFC = 2
    ATC = AFC + AVC
    ATC = 2 + 20
    ATC = 22
    No because average cost went up $310 and she’s only offered $220.
    Last edited by petedam; October 16th 2010 at 05:22 PM.
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