Question

Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1.00 per poster. She has fixed costs of $250.00. Her variable costs are $1,500 for the first thousand posters, $1,200 for the second thousand, and then $800 for each additional thousand posters.

What is her AFC per poster if she prints 1,000 posters?

Answer 1

AFC mean average fixed costs. This is equal to total fixed costs divided by the amount of output. If the output is equal to 1000, then the AFC is

AFC = $250.00 ÷ 1,000
AFC = $ 0.25

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