Question

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000, Group of answer choices average total cost is $2.50. average fixed cost is 50 cents. average variable cost is $2. average total cost is 50 cents.

Answer 1

Answer:

The true answer:

average fixed cost is 50 cents

Explanation:

The firm produces 400 units of output at a total cost of $1,200.

Average total cost = $1,200/400 = $3.00

Total variable costs are $1,000, total fixed cost = Total cost - total variable costs = $1,200 - $1,000 = $200

Average variable cost = $1,000/400 = $2.50

Average fixed cost = $200/400 = $0.50 (50 cents)