Question

If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:

Answer 1

The average variable cost per unit is 60 cents

Total costs= fixed costs + (variable costs x number of units)

Solve where x= variable cost per unit

$120= $60 + $100x Subtract 60 from both sides

60 = 100x Divide by 100

x = $0.60