Suppose that a firm is currently producing 500 units of output. At this level of​ output, TVC​ = $10,000 and TFC​ = $25,000. What is the firms​ ATC?

Question

Part 2
A.
​$100
B.
​$70
C.
​$20
D.
​$50

Answer 1

To find the firm's Average Total Cost (ATC), we need to calculate the Total Cost (TC) and then divide it by the number of units produced.

Total Cost (TC) = Total Variable Cost (TVC) + Total Fixed Cost (TFC)
TC = $10,000 + $25,000
TC = $35,000

Average Total Cost (ATC) = Total Cost (TC) / Quantity
ATC = $35,000 / 500
ATC = $70

So, the firm's ATC is ​$70.