Answer:
The formula for average cost (AC) is:
AC = (Total cost / Quantity)
To find the total cost, we need to add the variable cost (VC) and the avoidable fixed cost:
Total cost = VC + Fixed cost
Total cost = 20Q + 50,000
Now we can substitute this into the formula for average cost:
AC = (Total cost / Quantity)
AC = (20Q + 50,000) / Q
Simplifying this expression gives:
AC = 50,000/Q + 20
Therefore, the firm's average cost function is:
AC = 50,000/Q + 20
So, the correct answer is B.