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Homework answers / question archive / A firm's average total cost is $80, its average variable cost is $75, and its output is 50 units
A firm's average total cost is $80, its average variable cost is $75, and its output is 50 units. Its total fixed cost is
A. less than $100.
B. more than $300.
C. between $200 and $300.
D. between $100 and $200.
Answer: C
A firm's average total cost is the sum of its average variable cost and average fixed cost. This gives us the following equation:
ATC=AVC+AFC$80=$75+TFC/Q$80=$75+TFC/50$5=TFC/50TFC=$250ATC=AVC+AFC$80=$75+TFC/Q$80=$75+TFC/50$5=TFC/50TFC=$250
where:
As you can see, we solved for total fixed cost which is $250 and thus the answer is C.
