Question

Slider owns a hamburger restaurant. Slider's minimum average variable cost is $ 10 at a quantity of 100 hamburgers, and his minimum average total cost is $ 15 at a quantity of 200 hamburgers. His total fixed cost is $ 300 . Use this information to answer the questions.


a. What is Slider's AVC when he sells 200 hamburgers?

b. At a quantity of 25 hamburgers, the average total cost curve is:


i. below average variable cost.

ii. decreasing.

iii. There is not enough information or none of the other answers is correct.

iv. increasing.

Answer 1

Answer:

1. $13.5

2. iv. increasing.

Explanation:

1. Average variable cost

Total cost = Average cost × Quantity

= 200 × $15

= $3,000

Variable cost = Total cost - Fixed cost

= $3,000 - $300

= $2,700

So,

Average variable cost = Variable cost ÷ Quantity

= $2,700 ÷ 200

= $13.5

2. The quantity of hamburgers is 250 hamburgers the total curve is increasing.

Note :- we assume 250 hamburgers instead of 25 hamburgers because it is misprint.

Answer 2

Slider runs a hamburger restaurant and wants to know Average Variable cost when 200 burgers are sold.

Total cost for 200 burgers is $15 which makes a total of $3,000 ($15 * 200 burgers)

Average Total Cost includes all costs i.e. variable and fixed.

Subtract fixed cost from Total Average cost to get only total variable cost.

$3,000 - $300 = $2,700

$2,700 is the total variable cost of 200 burgers.

$2,700 / 200 = $13.5

Average Variable Cost per hamburger is $13.5  

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