Question

Rody's firm produces trumpets in a perfectly competitive market. The table below shows Brody's total variable cl He has a fixed cost of $240, and the price per trumpet is $50.

Quantity Total Variable Cost
6 $120
7 $145
8 $165
9 $220
10 $290
11 $390

a. Calculate the average total cost of producing 8 trumpets. Show your work.

Answer 1

The average total cost of producing 8 trumpets is calculated by dividing the sum of the total variable costs and fixed costs by the quantity of output, yielding $50.63.

Step-by-step explanation:

Calculation of Average Total Cost for 8 Trumpets

The average total cost (ATC) is calculated by dividing the sum of total variable costs (TVC) and fixed costs (FC) by the quantity (Q) of output. The TVC for 8 trumpets is $165, and Brody's firm has fixed costs of $240. Therefore, the ATC for 8 trumpets is calculated as follows:

ATC = (TVC + FC) / Q

ATC = ($165 + $240) / 8

ATC = $405 / 8

ATC = $50.625

The average total cost of producing 8 trumpets is $50.63 (rounded to two decimal places). This includes both variable and fixed costs.