Suppose Honda's total cost of producing 4 cars is $225,000 and its total cost of producing 5 cars is $250,000

a)What is the average total cost of producing 5 cars
b)What is the marginal cost of the fifth car?
c)Draw the marginal cost curve and the average total cost curve for a typical firm,and explain why these curves cross where they do

Average total cost of producing 5 cars is

ATC=Change in TC/ Change in Q
or Delta TC/ Delta Q
which is 250000/5
50000.

Marginal Cost for 5th car is
25000

I don't know but I need the graph of this question

a) To find the average total cost of producing 5 cars, we need to divide the total cost by the number of cars.

Average total cost = Total cost / Number of units produced

Average total cost of producing 5 cars = $250,000 / 5 cars = $50,000

Therefore, the average total cost of producing 5 cars is $50,000.

b) The marginal cost is the change in total cost when one additional unit is produced. In this case, we need to find the difference in total cost when producing 5 cars compared to producing 4 cars.

Marginal cost of the fifth car = Total cost of producing 5 cars - Total cost of producing 4 cars

Marginal cost of the fifth car = $250,000 - $225,000 = $25,000

Therefore, the marginal cost of the fifth car is $25,000.

c) The marginal cost curve and the average total cost curve for a typical firm are graphical representations of the costs associated with producing each additional unit.

The marginal cost curve typically begins to rise after a certain point, indicating that it becomes more expensive to produce additional units. This is because as production increases, factors like resource scarcity and diminishing returns start to affect the cost of production.

The average total cost curve, on the other hand, reflects the average cost per unit of production. Initially, as production increases, the average total cost may decrease due to economies of scale. However, at a certain point, the average total cost starts to increase because the cost of producing additional units outweighs the economies of scale.

The reason these curves cross is due to the relationship between the marginal cost and the average total cost. When the marginal cost is less than the average total cost, the average total cost decreases. Conversely, when the marginal cost is greater than the average total cost, the average total cost increases. Therefore, the point where the curves intersect indicates the minimum average total cost, which is the most cost-efficient level of production for the firm.

To answer these questions, we need to understand the concepts of average total cost (ATC) and marginal cost (MC) in economics.

First, let's calculate the ATC for producing 5 cars:

a) Average Total Cost (ATC):
ATC is calculated by dividing the total cost by the quantity of output. In this case, the total cost of producing 5 cars is given as $250,000.

ATC = Total Cost / Quantity
ATC = $250,000 / 5
ATC = $50,000

Therefore, the average total cost of producing 5 cars is $50,000.

Now, let's calculate the marginal cost of the fifth car:

b) Marginal Cost (MC):
MC is the additional cost of producing one more unit of output. To find the MC of the fifth car, we need to calculate the change in total cost from producing 4 cars to producing 5 cars.

MC = Change in Total Cost / Change in Quantity

Change in Total Cost = Total Cost of 5 cars - Total Cost of 4 cars
Change in Total Cost = $250,000 - $225,000
Change in Total Cost = $25,000

Change in Quantity = 5 cars - 4 cars
Change in Quantity = 1 car

MC = $25,000 / 1
MC = $25,000

Therefore, the marginal cost of producing the fifth car is $25,000.

c) Marginal Cost Curve and Average Total Cost Curve:

In a typical firm, the MC curve and ATC curve have a particular relationship. The MC curve crosses the ATC curve at the minimum point of the ATC curve.

The reason for this is that when the MC is below the ATC, it pulls the ATC down. On the other hand, when the MC is above the ATC, it pushes the ATC up.

Initially, when the level of output is low, the MC is typically below the ATC, pulling the ATC down. As the level of output increases, the MC tends to rise, pushing the ATC up. The intersection point is where the MC curve crosses the ATC curve, indicating the minimum point of the ATC curve.

So, in summary, the MC and ATC curves cross at the minimum ATC point because the MC pulls down the ATC initially and then pushes it up as output increases.