The total cost of a firm is $50,the average variable cost is $2,and the average fixed cost is $3.How many units of output does the firm produce?

Question

Quizplus · Accepted Answer

Total cost = Average Variable Cost x Quantity + Average Fixed Cost
$50 = $2Q + $3
$47 = $2Q
Q = 23.5

Since the quantity must be a whole number, the firm can produce either 23 or 24 units. However, since the average variable cost is less than the price of the product, it would be profitable for the firm to produce as much as possible in the short run. Therefore, the firm would produce 24 units.

The Total Cost of a Firm Is $50,the Average Variable