Suppose you operate a factory that produces gadgets. Your current output is 1,000 gadgets. If your fixed cost is $10,000 and your total cost is $50,000, the:
A) average total cost of production is $500.
B) average variable cost of production is $40.
C) average variable cost of production is $50.
D) marginal cost of production is $40,000.

Question

Quizplus · Accepted Answer

The total variable cost is $40,000 ($50,000 total cost - $10,000 fixed cost). The average variable cost is $40 ($40,000 / 1,000 gadgets).

Suppose You Operate a Factory That Produces Gadgets