The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.1

-In Figure 10.1, average fixed cost, at the profit-maximizing level of output, is equal to ______.

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.1
 
-In Figure 10.1, average fixed cost, at the profit-maximizing level of output, is equal to ______.

Quizplus · Accepted Answer

At the profit-maximizing level of output, the firm produces where MR=MC, which is at output level "e". From "e", we can see that the total cost is equal to GH and the total revenue is equal to UN. Therefore, the profit is equal to UN-GH. The average fixed cost at this output level is equal to the fixed cost (which is GH) divided by the quantity produced (which is e). Thus, average fixed cost at the profit-maximizing level of output is equal to GH/e, which is equal to C since GH and e intersect at C in the figure.

The Figure Given Below Shows the Revenue and Cost Curves