Question

"If the variable costs for a firm are $10,000, the fixed costs

are $5,000, and the firm sells 300 units, what is the firm's
average total cost?
a.) $500
b.) $400
c.) $40
d.) $50"

Answer 1

The firm's average total cost for selling 300 units is calculated by adding the fixed costs of $5,000 to the variable costs of $10,000, resulting in a total cost of $15,000. Dividing the total cost by the number of units (300) gives an average total cost of $50 per unit.

Step-by-step explanation:

To find the firm's average total cost (ATC), we need to first sum up the total costs, which include both fixed costs and variable costs. In this scenario, the variable costs are $10,000, and the fixed costs are $5,000. The total number of units sold is 300. To calculate the ATC, we add the fixed costs and variable costs to get the total costs, and then divide this sum by the number of units sold.

Using the formula:

ATC = (Fixed Costs + Variable Costs) / Quantity

ATC = ($5,000 + $10,000) / 300

ATC = $15,000 / 300

ATC = $50

Therefore, the average total cost of the firm for selling 300 units is $50.