Question

Microeconomics

Posted 3 months ago

```
The table below contains information about a firm's current production:
\begin{tabular}{ll}
Variable & Value \\
\hline Quantity & 100 \\
Total costs & $\$ 18,000$ \\
Variable costs & $\$ 11,000$
\end{tabular}
What is the firm's average fixed cost for producing 100 units?
Choose 1 answer:
(A) $\$ 180$
(B) $\$ 1000$
(C) $\$ 290$
(D) $\$ 110$
(E) $\$ 70$
```

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Answer from Sia

Posted 3 months ago

Solution

a

Definition of Average Fixed Cost: Average Fixed Cost (AFC) is calculated by dividing the total fixed costs (TFC) by the quantity of output produced

b

Calculation of Total Fixed Costs: Total Fixed Costs (TFC) can be found by subtracting the total variable costs (TVC) from the total costs (TC).
$TFC = TC - TVC$
Given:
$TC = \$18,000$
$TVC = \$11,000$
$TFC = 18,000 - 11,000 = \$7,000$

c

Calculation of Average Fixed Cost: Now, we divide the total fixed costs by the quantity to find the average fixed cost.
$AFC = \frac{TFC}{Q}$
Given:
$Q = 100$
$AFC = \frac{7,000}{100} = \$70$

Answer

(E) $70

Key Concept

Average Fixed Cost (AFC)

Explanation

The average fixed cost is calculated by dividing the total fixed costs by the quantity of output produced. In this case, the total fixed costs are $7,000 and the quantity is 100 units, resulting in an average fixed cost of$70 per unit.

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