A firm incurred a total fixed cost of $400,000 and total variable cost of $600,000 to...

A firm incurred a total fixed cost of $400,000 and total variable cost of $600,000 to produce 50,000 units of output.

What are the average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC)?

Solutions

Expert Solution

The total fixed cost is $400,000.

The total variable cost is $600,000 to produce 50,000 units of output.

The average fixed cost can be calculated by dividing the total fixed cost by quantity produced. The average variable cost can be calculated by dividing the total variable cost by the quantity produced.

So, average fixed cost is 400,000/50,000 = $8 and the average variable cost is 600,000/50,000 = $12. The total cost is the sum of the total fixed cost and the total variable cost. So, the total cost is $400,000 + $600,000 which equals $1,000,000.

The average total cost can be calculated by dividing the total cost by the quantity produced. So, the average total cost is 1,000,000/50,000 = $20.

Rahul Sunny answered 1 year ago

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