Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
$5
B
$10
C
$15
D
$20
Understanding the Answer
Let's break down why this is correct
Answer
To find the average total cost per unit in a perfectly competitive market, you need to divide the total cost by the number of units produced. In this case, the total cost is $500, and the firm produces 100 units. So, you take $500 and divide it by 100, which gives you an average total cost of $5 per unit. This means that for every unit the firm produces, it costs them $5 to make it when considering all their expenses. Understanding this helps firms decide if they are pricing their products correctly to cover costs and make a profit.
Detailed Explanation
To find the average total cost, divide the total cost by the number of units. Other options are incorrect because This answer might come from thinking the total cost is too high for the number of units; This choice may seem right if you miscalculate the division.
Key Concepts
Average Total Cost
Market Structure
Topic
Calculating Average Total Cost
Difficulty
medium level question
Cognitive Level
understand
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