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Question

You are thinking about setting up a lemonade stand. The stand itself costs $200. The ingredients for each cup of lemonade cost$0.50. a. What is your fixed cost of doing business? What is your variable cost per cup? b. Construct a table showing your total cost, average total cost, and marginal cost for output levels varying from 0 to 10 gallons. (Hint: There are 16 cups in a gallon.) Draw the three cost curves.

Solution

VerifiedAnswered 2 years ago

Answered 2 years ago

Step 1

1 of 6The cost of the stand is the fixed cost and the cost for each cup is the variable cost.

Since we are asked to calculate costs up to $10$ gallons of lemonade, and there are $16$ cups in a gallon, we know the variable cost per gallon can be calculated as VC per cup times how many cups are in a gallon.

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