Question

You run a small business producing candles. This month your total cost is $10,000, your variable cost is $5,000, and your output is 5,000 candles. Given this information, your: Group of answer choices Average total cost is $3. Average fixed cost is $1. Average total cost is $1. Average variable cost is $2.

Answer 1

Average cost =$2 per candle

Step-by-step explanation:

Average cost is the cost of producing a typical unit of a product. It is determined as follows:

Average cost = Total cost/ Number of units

Total cost is the sum of variable and fixed cost and it is given in the question as $10,000

So, average cost = $10,000/5,000 candles

=$2 per candle

Answer 2

Average fixed cost is $1

Step-by-step explanation:

Given that

Total cost = 10000

Variable cost = 5000

Output = 5000

Recall that

Total cost = fixed cost + variable cost

Fixed cost = total - variable

Fixed cost = 10,000 - 5000

FC = 5000

Also,

Average Fixed cost = fixed cost / output

Thus = 5000/5000

= $1

Therefore, Average Fixed cost is $1.

Also note that

Average variable cost, AVC = $1

Average Total cost, ATC = $2