Reference: Ref 11-7 (Table: Competitive Firm) Refer to the table that shows the revenue and cost schedules for a competitive firm. What is the average fixed cost at the profit maximizing quantity?
A) $54.30
B) $4.28
C) $50
D) $80

Question

Reference: Ref 11-7 (Table: Competitive Firm) Refer to the table that shows the revenue and cost schedules for a competitive firm. What is the average fixed cost at the profit maximizing quantity?
A) $54.30 
B) $4.28 
C) $50 
D) $80

Quizplus · Accepted Answer

To find the average fixed cost (AFC) at the profit maximizing quantity, we need to first determine the quantity. At the profit maximizing quantity, Marginal Cost (MC) = Marginal Revenue (MR) which is $14. Then, we can find the quantity at which MC = MR by looking at the table and finding the quantity that corresponds to a MC of $14. This quantity is 30.

Next, we can find AFC by using the formula AFC = FC/Q where FC is the total fixed cost and Q is the quantity. From the table, we know that the total fixed cost is $128.40. Substituting in Q = 30, we get AFC = 128.40/30 = $4.28, which is option B.

Reference: Ref 11-7 (Table: Competitive Firm) Refer to the Table