Question

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

A. are $2.50.
B. are $1,250.
C. are $750.
D. are $1,100.

Answer 1

In the short run, the total costs for the Sure-Screen T-Shirt Company producing 500 units of output would be $2.50 per unit.

Step-by-step explanation:

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. The average variable cost is $2.00, which means that for each unit produced, the cost of the variable inputs, such as labor and raw materials, is $2.00 on average. The average fixed cost is $0.50, which represents the cost of the firm's fixed inputs, such as machinery and rent, spread out over each unit produced.

To calculate total costs, we need to add together the average variable costs and the average fixed costs. In this case, the total costs would be $2.00 + $0.50 = $2.50 per unit of output.