A firm's average total cost is $80, its average variable cost is $75, and its output is 50 units. Its total fixed cost is
A) less than $100.
B) between $100 and $200.
C) between $200 and $300.
D) more than $300.

Question

Quizplus · Accepted Answer

The total fixed cost (TFC) can be calculated by subtracting total variable cost (TVC) from total cost (TC). TC is average total cost (ATC) times quantity (Q), and TVC is average variable cost (AVC) times Q. So, TFC = (ATC * Q) - (AVC * Q) = ($80 * 50) - ($75 * 50) = $4000 - $3750 = $250. This is between $200 and $300.

A Firm's Average Total Cost Is $80, Its Average Variable