Question 3) Oscar runs a small coffee shop close to Glenferrie station. In the short run, Oscar will not have the funds to upgrade his coffee shop with new additional machines and equipment. The table below shows how the quantity of coffees he can sell per day depends on the number of staff he hires. Oscar pays each staff $200 per day. The shop's rent is $2,100 per month; or $70 per day. For simplicity purposes, assume wages and rent are the only two costs in Oscar's daily business Quantity Quantity Fixed Variable Total Average Marginal of staff of coffees Cost Cost Cost Total Cost Cost made (Rent) (Wage) 0 0 $70 0 $70 1 30 $70 $200 $270 2 70 $70 $400 $470 3 130 $70 $600 $670 4 170 $70 $800 $870 5 200 $70 $1,000 $1,070 a. Calculate Average Total Cost and fill in the table above b. Calculate Marginal Cost and fill in the table above c. For the first three employees, marginal cost keeps decreasing. However, from employee number 4, marginal cost begins and continues to rise. Clearly explain why it is the case.
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