-Refer to Table 10-3. What is its average variable cost of production at its optimal output level?
A) $0 (because its optimal output = 0)
B) $15
C) $14.75
D) $29

Question

Quizplus · Accepted Answer

The optimal output level is where MC=MR, which is 60 units in this case. At this level, the AVC is $14.75, which is calculated by dividing the total variable cost of producing 60 units ($885) by the quantity produced (60 units). Therefore, the average variable cost of production at the optimal output level is $14.75. Option A is incorrect because the optimal output level is not zero in this case. Option B is incorrect because $15 is the AVC at a quantity of 50, not the optimal output level. Option D is incorrect because it is the total cost at the optimal output level, not the AVC.