Question

The following questions are based on the table below, which shows a firm’s average variable cost and average total cost.

The figure shows a table with 3 columns and 6 rows of data. The first column is labeled Output, the second column is labeled Average Variable Cost, and the third column is labeled Average Total Cost. Row 1; Output, 1; Average Variable Cost, $40; Average Total Cost, $160. Row 2; Output, 2; Average Variable Cost, $35; Average Total Cost, $95. Row 3; Output, 3; Average Variable Cost, $40; Average Total Cost, $80. Row 4; Output, 4; Average Variable Cost, $45; Average Total Cost, $75. Row 5; Output, 5; Average Variable Cost, $50; Average Total Cost, $74. Row 6; Output, 6; Average Variable Cost, $55; Average Total Cost, $75.

43

Mark for Review

The average fixed cost of producing four units of output is equal to


$120


a

$95


b

$75


c

$50


d

$30

Answer 1

AFC = ATC − AVC. For output = 4: AFC = $75 − $45 = $30.

Answer: $30 (d).