The Framing Gallery frames posters and has total fixed costs of $1,000. The Framing Gallery is currently framing ________ posters if its average variable cost is $20 and its average total cost is $30.
A) 5
B) 25
C) 100
D) an indeterminate number of

Question

Quizplus · Accepted Answer

The average total cost (ATC) is the sum of the average fixed cost (AFC) and the average variable cost (AVC). Given that the ATC is $30 and the AVC is $20, the AFC must be $10 ($30 - $20). Since the total fixed costs are $1,000, dividing this by the AFC ($10) gives the number of posters being framed, which is 100 posters.

The Framing Gallery Frames Posters and Has Total Fixed Costs