Question

Suppose a firm is producing 100 units of output, incurring a total cost of $10 000 and total variable cost of $6000. it can be concluded that average fixed cost is:______

a) $40.
b) $60.
c) $100.
d) $160.
e) $4000.

Answer 1

The average fixed cost, calculated by subtracting the total variable cost from the total cost and then dividing by the quantity of output, is $40 per unit.

Step-by-step explanation:

The student's question is about calculating the average fixed cost given certain financial information about a company's production costs. With a total cost of $10,000 and a total variable cost of $6,000 for producing 100 units of output, the total fixed cost is the difference between these two figures, which is $4,000. The average fixed cost is then calculated by dividing the total fixed cost by the quantity of output produced:

Total Fixed Cost = Total Cost - Total Variable Cost
Total Fixed Cost = $10,000 - $6,000
Total Fixed Cost = $4,000
Average Fixed Cost = Total Fixed Cost / Quantity of Output
Average Fixed Cost = $4,000 / 100 Units
Average Fixed Cost = $40 per Unit

So the correct answer is a) $40.