Asked by anmol setia on May 07, 2024
Verified
Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?
A) $4
B) $10
C) $40
D) $135
Average Fixed Cost
Production's fixed expenses (unchanged by the amount of production) split by the quantity of product made.
Average Variable Cost
The cost that varies with the level of output, computed by dividing total variable costs by the quantity of output produced.
Total Cost
A comprehensive total of expenses involved in the creation of goods or services, covering both fixed and variable costs.
- Assess the average fixed, variable, and comprehensive costs using the data provided.
Verified Answer
KD
Kaaona DegnerMay 12, 2024
Final Answer :
A
Explanation :
The average variable cost (AVC) is given as $33.75 when four units of output are produced. The total variable cost (TVC) for four units can be calculated as AVC * quantity = $33.75 * 4 = $135. The total cost (TC) at this output level is $175, which includes both variable and fixed costs. The fixed cost (FC) can be found by subtracting the total variable cost from the total cost: FC = TC - TVC = $175 - $135 = $40. This fixed cost remains constant regardless of the output level. When ten units are produced, the average fixed cost (AFC) can be calculated by dividing the fixed cost by the quantity produced: AFC = FC / quantity = $40 / 10 = $4.
Learning Objectives
- Assess the average fixed, variable, and comprehensive costs using the data provided.