Question

A movie studio has some costs it incurs even if it produces no movies at all in a given year. Think of these as the costs of having an office and studio staffed with the minimum staff. As a consultant, you have obtained data about the studio's production costs. Unfortunately, you do not know what the fixed costs are. What you do know is that, after the studio produced one movie last year, the studio's total cost equaled $42 million. After the studio produced its second movie last year, the studio's total cost equaled $ 84 million. Finally, after the studio produced its third movie last year, the studio's total cost equaled $132 million.
Part 1 :Given the information above, you would know with certainty that, last year, the firm's variable costs were greater than or equal to $ million million, but less than $ 47 255
Part 2 : Suppose that, speaking to some of the accountants involved in the production of the first movie, you find out that the marginal cost of producing the first movie was $45 million. The firm's variable costs of producing all three movies last year are then $ 111 million.

Answer 1

Explanation:

Part 1 : True, from the details provided about the movie studio total cost last year indicates after substractions of the differences in total

3rd movie cost - 2nd = 132-84 = 48 million

Therefore, the variable costs should greater than or equal to $47 million, but less than $255 million.

Part 2 :  False, the marginal cost of producing the first movie was $45 million. And there were three movies made by the firm.

Therefore, the firm's variable costs of producing all three movies last year would be

45 x 3 = 135 million