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If the total cost of producing 20 units of output is and the average
variable cost is , what is the firm's average fixed cost at that level of
output?
o 0
$50

Ask by Sherman Bond. in the United States
Mar 28,2025

Upstudy AI Solution

Tutor-Verified Answer

Answer

The firm’s average fixed cost is $15.

Solution

We know that the total cost (TC) is the sum of the total variable cost (TVC) and the total fixed cost (TFC). That is,
  1. Given that the average variable cost (AVC) is and the firm produces 20 units of output, the total variable cost is:
  1. The total fixed cost can be obtained by subtracting the total variable cost from the total cost:
  1. Finally, the average fixed cost (AFC) is the total fixed cost divided by the number of units produced:
Thus, the firm’s average fixed cost at 20 units of output is .

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Extra Insights

To figure out the average fixed cost (AFC), we first need to understand the relationship between total cost (TC), variable cost (TVC), and fixed cost (TFC). We know that:
Given that the total cost of producing 20 units is $1,000, and the average variable cost (AVC) is $35, we can first calculate the total variable cost:
Now that we have TVC, we can find TFC using:
With the total fixed cost determined, we can now find the average fixed cost:
Therefore, the firm’s average fixed cost at that level of output is $15.

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