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Suppose that a firm is currently producing 500 units of output
Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $1,000 and TFC = $2,500. What is the firm's ATC?
Expert Solution
As we know
TFC =2500
TVC =1000
Total cost (TC) = TFC + TVC
Total cost = 2500 + 1000
Total cost = 3500
Average total cost (ATC) = Total cost / Q
ATC = 3500 / 500
ATC = 7
It shows that the average total cost is 7 at quantity of 500.
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