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Calculating Average Total Cost
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What is the Average Total Cost (ATC) if a firm has fixed costs of $100 and variable costs of $400 when producing 50 units?

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Choose the Best Answer

A

$10

B

$12

C

$14

D

$8

Understanding the Answer

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Answer

To find the Average Total Cost (ATC), we first need to understand what total cost means. Total cost is the sum of fixed costs and variable costs. In this case, the fixed costs are $100, and the variable costs are $400, so the total cost is $100 plus $400, which equals $500. To find the ATC, we divide the total cost by the number of units produced. Since the firm produces 50 units, we divide $500 by 50, which gives us an ATC of $10 per unit.

Detailed Explanation

To find the Average Total Cost, add fixed and variable costs. Other options are incorrect because This answer might come from misunderstanding the division; This choice could be from miscalculating the total cost.

Key Concepts

Fixed Costs
Topic

Calculating Average Total Cost

Difficulty

easy level question

Cognitive Level

understand

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