Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. $\begin{array}{|c|c|}
\hline \text { Output } & \text { ATC } \
\hline 1 & \$ 40 \
\hline 2 & 27 \
\hline 3 & 29 \
\hline 4 & 31 \
\hline 5 & 38 \
\hline
\end{array}$ The average variable cost of 4 units of output is

Question

Quizplus · Accepted Answer

To find the average variable cost of 4 units of output, we need to deduct the average fixed cost from the average total cost. As given, the total fixed cost is $10.

For 4 units of output, the ATC is $31. 
ATC = Total Cost / Output 
31 = (Total Fixed Cost + Total Variable Cost) / 4 
124 = Total Fixed Cost + Total Variable Cost 
Total Variable Cost = 124 - 10 (Total Fixed Cost) 
Total Variable Cost = $114

Now, to find the average variable cost, we divide the total variable cost by the output. 
Average Variable Cost = Total Variable Cost / Output 
Average Variable Cost = 114 / 4 = $28.50

Therefore, the answer is choice B, $28.50.

Answer the Question on the Basis of the Accompanying Table