• The correct answer is a. average fixed cost is 50 cents.

Let us compute the total fixed cost.

Totalfixedcost=Totalcost−TotalvariablecostTotalfixedcost=1,200−1,000=200Totalfixedcost=Totalcost−TotalvariablecostTotalfixedcost=1,200−1,000=200

The total fixed cost is $200.

Let us compute the average fixed cost.

Averagefixedcost=TotalfixedcostQuantityAveragefixedcost=200400Averagefixedcost=0.5Averagefixedcost=TotalfixedcostQuantityAveragefixedcost=200400Averagefixedcost=0.5

The average fixed cost is 50 cents.

Let us compute the average variable costs.

Averagevariablecost=TotalvariablecostQuantityAveragevariablecost=1,000400Averagevariablecost=2.50Averagevariablecost=TotalvariablecostQuantityAveragevariablecost=1,000400Averagevariablecost=2.50

The average variable cost is $2.50.

Let us compute the average total cost.

Averagetotalcost=Averagefixedcost+AveragevariablecostAveragetotalcost=0.50+2.50Averagetotalcost=3.00Averagetotalcost=Averagefixedcost+AveragevariablecostAveragetotalcost=0.50+2.50Averagetotalcost=3.00

The average total cost is $3.00.