Question

The total cost of producing 15 tons of butter is $50000. If average variable cost is $815, then what is the firm's average fixed cost

Answer 1

Answer: $2518.33

Explanation:

Given: Total cost (TC) = $50000

Quantity (Q) = 15 tons

Average variable cost (AVC) =  $815

To find : average fixed cost (AFC)

Since, TC = FC + VC

$\Rightarrow\ \dfrac{TC}{Q}=\dfrac{FC+VC}{Q}\\\\\Rightarrow\ \dfrac{50000}{15}=\dfrac{FC}{Q}+\dfrac{VC}{Q}\\\\\Rightarrow\ \dfrac{50000}{15}=AFC+AVC\\\\\Rightarrow\ AFC= \dfrac{50000}{15} - AVC\\\\\Rightarrow\ AFC= \dfrac{50000}{15} - 815\\\\=3333.33- 815=\ 2518.33$

Hence, firm's average fixed cost= $2518.33