Question

MeC_20_7 Microeconomics

The Costs of Production
Miller Technologies has average variable costs of $1 and average total costs of $3 when it
produces 500 units of output. The firm's total fixed costs equal
A). $500
B). $1,000
C). $1,500
D). $2,000"

Answer 1

To calculate Miller Technologies' total fixed costs, multiply the average variable cost and average total cost by the output, then subtract the total variable cost from the total cost. The difference, $1,000, represents the total fixed costs.

Step-by-step explanation:

The question provided deals with the concepts of average variable cost and total fixed cost in the context of microeconomics. We know that Miller Technologies has average variable costs of $1 and average total costs of $3 when producing 500 units. The average total cost includes both variable and fixed costs. Hence, to find the total fixed cost, we need to subtract the total variable costs from the total costs. Here's a step-by-step explanation:

• The total variable cost (TVC) is calculated as the average variable cost (AVC) times quantity (Q), so TVC = $1 × 500 = $500.
• The total cost (TC) is calculated as the average total cost (ATC) times quantity (Q), so TC = $3 × 500 = $1500.
• To find the total fixed cost (TFC), we subtract the total variable cost from the total cost, so TFC = TC − TVC = $1500 − $500 = $1000.

Therefore, the firm's total fixed costs equal $1,000, which corresponds to option B).