Scenario 14-2
The information below applies to a competitive firm that sells its output for $45 per unit.
• When the firm produces and sells 120 units of output, its average total cost is $23.5.
• When the firm produces and sells 121 units of output, its average total cost is $23.65.
-Refer to Scenario 14-2. Suppose the firm is producing 120 units of output and its fixed cost is $950. Then its average variable cost amounts to

Question

Quizplus · Accepted Answer

To find the average variable cost (AVC) when producing 120 units, we first calculate the total cost (TC) at 120 units, which is $23.5 * 120 = $2820. Subtracting the fixed cost ($950) from the total cost gives us the total variable cost (TVC) of $1870. Dividing the TVC by the quantity (120 units) gives us the AVC, which is $1870 / 120 = $15.58.

Scenario 14-2 The Information Below Applies to a Competitive Firm That Sells