Question

Ramblin’ Randy’s Dude Ranch’s daily total cost of accommodating overnight guests is given by TC = 100 + 5 Q. On the basis of this information, the average fixed cost, when there are 25 overnight guests, is:

Answer 1

Answer: 4

Step-by-step explanation:

The average fixed cost is calculated as:

= Fixed cost / output

Since total cost is given as TC = 100 + 5Q, the fixed cost in this case is 100 as.it doesn't depend on output. In this case, 5Q is the variable cost.

Since average fixed cost is calculated as:

= Fixed cost / output

= 100 / 25

= 4

Therefore, the average fixed cost is 4