Question

A shoe factory produces 20 units of output. Its average fixed cost (AFC) = $25, average total cost (ATC) = $35, and marginal cost (MC) = $15. The shoe factories average variable cost (AVC) is ________.

Answer 1

Answer:

$10

Explanation:

Data provided in the question

Number of units produced = 20 units

Average fixed cost = $25

Average total cost = $35

Marginal cost = $15

As we know that

Average total cost = Average fixed cost + average variable cost

$35 = $25 + average variable cost

So, the average variable cost is

= $35 - $25

= $10

The average total cost is the sum of average fixed cost and the average variable cost