If total fixed costs are $1,000,variable costs are constant at $5.00 per unit over the relevant range of output and average total cost is $6,what is average fixed cost?
A)$1
B)$5
C)$10
D)$1,000

Question

Quizplus · Accepted Answer

We know that the average total cost (ATC) is equal to the sum of average variable cost (AVC) and average fixed cost (AFC). So, if ATC is $6 and AVC is $5, then AFC must be $1.

AFC = ATC - AVC
AFC = $6 - $5
AFC = $1

Therefore, the correct choice is A) $1 as the average fixed cost.

If Total Fixed Costs Are $1,000,variable Costs Are Constant at $5.00