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 total cost?
A)$2.50
B)$10
C)$12.50
D)$1,010

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 total cost?
A)$2.50 
B)$10 
C)$12.50 
D)$1,010

Quizplus · Accepted Answer

If Pat purchases 1 mixer and bakes 400 cakes per day, her total cost would be $1,000 (fixed cost of $500 + variable cost of $0.50 per cake). Her average total cost would be $2.50 per cake ($1,000 total cost ÷ 400 cakes). This is the lowest average total cost out of the options given, so purchasing 1 mixer would be the best choice.

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