Question

Loco Pony Adventures rents clowns and ponies for children’s birthday parties. If the annual total cost of furnishing entertainment is given by TC = 0.5 Q 2 + 25 Q + 1,000, the average variable cost of catering to 30 birthday parties is:

Answer 1

Answer and Explanation:

The computation is shown below:

As we know that the variable cost is the cost that changed with the production

So the variable cost arise from TC should be

VC=0.5Q^2+25Q

= 0.5 × (30)^2+25 × 30

= 1200

And,  

AVC is

= VC ÷ Q

= 1200 ÷ 30

= 40