Question

If the average total cost is $ 50 and the average fixed cost is $15 when output is 20 units then the firm's total variable cost at the level of output is

Answer 1

Total Variable Cost at the level of output is $700.

Step-by-step explanation:

TC = TFC + TVC

$50(20) = $15(20) + TVC

TVC = $1000 - $300

TVC = $700

Answer 2

Total variable cost = $700

Step-by-step explanation:

We know,

Total cost = Total fixed cost + Total variable cost

Given,

Average total Cost = $50,

Output = 20 units

Total Cost = Average total cost x output

Total Cost = $50 x 20 units

Total Cost = $1,000

Average fixed cost = $15

Total fixed cost = $15 x 20 units

Total fixed cost = $300

Putting the value in the formula, we can get,

Total cost = Total fixed cost + Total variable cost

or, $1,000 = $300 + Total variable cost

or, Total variable cost = $1,000 - $300

Hence, Total variable cost = $700