In the table below,the capital stock is fixed at 40 units,the price of capital is $15 per unit,and the price of labor is $80 per unit. $$\begin{array} { c c }
\text { Units of } & \text { Units of } \
\text { Labor } & \text { Output } \
\hline 5 & 40 \
10 & 100 \
15 & 180 \
20 & 220
\end{array}$$ If the firm produces 40 units of output,what is average fixed cost?
A)$7.50
B)$25
C)$120
D)$600
E)none of the above

Question

In the table below,the capital stock is fixed at 40 units,the price of capital is $15 per unit,and the price of labor is $80 per unit. $$\begin{array} { c c } 
\text { Units of } & \text { Units of } \
\text { Labor } & \text { Output } \
\hline 5 & 40 \
10 & 100 \
15 & 180 \
20 & 220
\end{array}$$ If the firm produces 40 units of output,what is average fixed cost?
A)$7.50
B)$25
C)$120
D)$600
E)none of the above

Quizplus · Accepted Answer

Average Fixed Cost (AFC) is calculated as the total fixed costs divided by the quantity of output produced. In this scenario, the fixed cost is the cost of capital, which is 40 units at $15 per unit, totaling $600. However, the question asks for the AFC at a production level of 40 units of output, which requires dividing the total fixed cost ($600) by the quantity of output (40 units), resulting in an AFC of $15 per unit, which is not listed among the options provided.

In the Table Below,the Capital Stock Is Fixed at 40