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23 August, 10:00

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?

a. $135b. $4c. $40d. $10

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  1. 23 August, 13:51
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    Total variable cost if 4 units were produced

    = $33.75 x 4 units = $135

    Total fixed cost = Total cost - Total variable cost

    Total fixed cost = $175 - $135

    Total fixed cost = $40

    Average fixed cost = Total fixed cost/No of units

    Average fixed cost = $40/10 units

    Average fixed cost = $4

    The correct answer is B

    Explanation:

    In this case, we need to calculate the total variable cost on the ground that 4 units were produced. Then, we will determine the total fixed cost by deducting the total variable cost from total cost. Finally, we will divide the total fixed cost by 10 units in order to obtain the average fixed cost.
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