Use the following to answer question:
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer and bakes 400 cakes per day,what is her average fixed cost?
A)$0.025
B)$2.50
C)$1,000
D)$400,000

Question

Use the following to answer question: 
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer and bakes 400 cakes per day,what is her average fixed cost?
A)$0.025 
B)$2.50 
C)$1,000 
D)$400,000

Quizplus · Accepted Answer

Average fixed cost is the fixed cost per unit of output. In this case, if Pat purchases 1 mixer and bakes 400 cakes per day, her estimated fixed cost is $1,000. Therefore, her average fixed cost is:
Avg. Fixed Cost = Fixed Cost / Quantity of output
Avg. Fixed Cost = $1,000 / 400 = $2.50 per cake. Therefore, the best choice for Pat would be to purchase 1 mixer.

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