Explain the cost structure of a firm producing packets of biscuits, including fixed costs, total variable costs, average costs, marginal costs, marginal revenue, and profits.

Here are the solutions to your questions.

Question 1: Cost structure of a firm producing packets of biscuits

a) What is the fixed cost and why?

Step 1: Identify fixed cost.
Fixed cost (FC) is the total cost incurred when the output is zero. From the table, when Output = 0, Total Cost (TC) = 10.
Therefore, the fixed cost is 10.
Fixed costs do not change with the level of production; they are incurred even when no output is produced.

b) Calculate: i) TVC ii) AC iii) MC iv) MR v) Profits

Step 1: Calculate Total Variable Cost (TVC).
TVC = TC - FC. Since FC = 10.

Step 2: Calculate Average Cost (AC).
AC = TC / Output.

Step 3: Calculate Marginal Cost (MC).
MC = $\frac{\Delta TC}{\Delta Output}$.

Step 4: Calculate Marginal Revenue (MR).
MR = $\frac{\Delta TR}{\Delta Output}$.

Step 5: Calculate Profits.
Profits = TR - TC.

Here is the completed table:

\hline Output & TC & TR & \textbf