Question

The total cost of producing 15 tons of butter is $50000. If average variable cost is $815, then what is the firm's average fixed cost

Answer 1

Answer: $2518.33

Step-by-step explanation:

Given: Total cost (TC) = $50000

Quantity (Q) = 15 tons

Average variable cost (AVC) = $815

To find : average fixed cost (AFC)

Since, TC = FC + VC

`\Rightarrow\ (TC)/(Q)=(FC+VC)/(Q)\\\\\Rightarrow\ (50000)/(15)=(FC)/(Q)+(VC)/(Q)\\\\\Rightarrow\ (50000)/(15)=AFC+AVC\\\\\Rightarrow\ AFC= (50000)/(15) - AVC\\\\\Rightarrow\ AFC= (50000)/(15) - 815\\\\=3333.33- 815=\$2518.33`

Hence, firm's average fixed cost= $2518.33