The capital stock is fixed at 50 units,the price of capital is $30 per unit,and the price of labor is $25 per unit. $$\begin{array} { c c }
\text { Output } & \begin{array} { c }
\text { Average} \
\text { Variable Cost }
\end{array} \
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60
\end{array}$$ Given the above,if the firm produces 20 units of output,what is average fixed cost?
A)$1.50
B)$50
C)$150
D)$600
E)none of the above

Question

The capital stock is fixed at 50 units,the price of capital is $30 per unit,and the price of labor is $25 per unit. $$\begin{array} { c c } 
\text { Output } & \begin{array} { c } 
\text { Average} \
\text { Variable Cost }
\end{array} \
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60
\end{array}$$ Given the above,if the firm produces 20 units of output,what is average fixed cost?
A)$1.50
B)$50
C)$150
D)$600
E)none of the above

Quizplus · Accepted Answer

The average fixed cost (AFC) is calculated as the total fixed cost (TFC) divided by the quantity of output produced. The total fixed cost is the cost of the fixed inputs, which in this case is the capital stock. Since the capital stock is fixed at 50 units and the price per unit of capital is $30, the total fixed cost is $50 \times $30 = $1500$. Producing 20 units of output, the AFC is $\frac{$1500}{20} = $75$, which is not listed among the options provided.

The Capital Stock Is Fixed at 50 Units,the Price of Capital