What are the average total costs of producing 4 BurritosAsBi

What are the average total costs of producing 4 Burritos-As-Big-As-Your-Head?

What are the total variable costs of producing 2 Burritos-As-Big-As-Your-Head?

When does Cozumels begin experiencing diminishing marginal returns?

Scenario 2: Use the following information to answer the next five questions. Cozumels, a Mexican restaurant, makes wonderful Burritos-As-Big-As-Your-Head. However, their financial department is not very organized. They have misplaced many of the company\'s records. Use the information you have below to answer the following FIVE questions: Total Fixed Cost Q: Quantity of Burritos Total Variable Cost Total Cost Marginal Cost 10 10 3 27 3 5 What are the total fixed costs of producing 4 Burritos-As-Big-As-Your-Head?

Solution

TC for 4 Burrritos = 32

We calculate TC_n+1 = TC_n + MC

TFC is same as 10 and does not change with change in production

TVC = TC - TFC

Diminishing Marginal Returns =

Diminishing Returns occurs in the short run when one factor is fixed (e.g. Capital) and the variable factor of production is increased, there comes a point where it will become less productive and marginal product (MP) starts declining. MC and MP are inversely related because increase in MP means decrease in MC.

At 3rd unit Cozumels begin experiencing diminishing marginal returns becuase MC is increasing thereafter.

Quantity (Q)	Total Fixed Cost (TFC)	Total Variable Cost (TVC)	Total Cost (TC =TFC +TVC)	Marginal Cost (MC = TCn+1 -TCn)
0	10	0	10	-
1	10	10	20	10
2	10	14	24	4
3	10	17	27	3
4	10	22	32	5