Question

A firm that produces handbags is incurring total costs of production in the short run of $39,000 per day. The firm's average variable cost equals $50 per unit and its average fixed cost equals $100 per unit. How many units is the firm producing per day?

Answer 1

The firm is producing approximately 780 units per day.

Step-by-step explanation:

The firm is incurring a total cost of $39,000 per day. However, this total cost consists of both fixed costs and variable costs. The average variable cost is given as $50 per unit, and the average fixed cost is $100 per unit. To find the number of units the firm is producing per day, we need to determine the variable cost per unit. Since the average variable cost is $50 per unit, we can divide the total variable cost by the average variable cost to get the number of units produced.

Let's assume the firm's average variable cost is denoted as AVC. We can calculate AVC using the formula:

AVC = Total Variable Cost / Quantity

Since the average variable cost is $50 per unit and the total variable cost is $39,000 per day, we can substitute these values into the formula:

$50 = $39,000 / Quantity

Solving for Quantity, we get:

Quantity = $39,000 / $50

Therefore, the firm is producing approximately 780 units per day.