Use the following table to answer questions a-c. Output (Q): 0 1 2 3

Use the following table to answer questions a-c.

Output (Q): 0 1 2 3 4 5 6
Total Cost (TC): $36 $45 $52 $61 $74 $91 $110

a. What is the average fixed cost of producing 4 units of output?
b. What is the marginal cost of producing the third unit of output?
c. At what level of output does the firm encounter diminishing marginal returns? How do you know?

ANSWER

a. $9
b. $9
c. Between 2 and 3 units of output. This is the point at which MC begins to increase.