At its current​ short-run level of​ production, a​ firm's average variable costs equal ​$20

Question

per​ unit, and its average fixed costs equal ​$15

per unit. Its total costs at this production level equal ​$1 comma 400
.
Part 2
What is the​ firm's current output​ level?

Answer 1

To determine the firm's current output level, we need to use the given information regarding average variable costs, average fixed costs, and total costs.

The formula for total cost is:
Total Cost = Total Fixed Cost + Total Variable Cost

In this case, the given total cost is $1,400 and the average fixed cost is $15 per unit. We can calculate the total fixed cost by multiplying the average fixed cost by the output level (x):
Total Fixed Cost = Average Fixed Cost x Output Level

So, Total Fixed Cost = $15x

Substituting this into the total cost formula, we get:
$1,400 = $15x + Total Variable Cost

Since the average variable cost is given as $20 per unit, the total variable cost can be calculated as:
Total Variable Cost = Average Variable Cost x Output Level

So, Total Variable Cost = $20x

Plugging this back into the total cost formula, we have:
$1,400 = $15x + $20x

Combining like terms, we get:
$1,400 = $35x

Now, we can solve for the output level (x) by dividing both sides of the equation by $35:
x = $1,400 / $35

x = 40

Therefore, the firm's current output level is 40 units.