Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $1,000 and TFC = $2,500. What is the firms ATC?
A) $2
B) $5
C) $7
D) $10

Question

Quizplus · Accepted Answer

To calculate average total cost (ATC), we need to divide the total cost (TC) by the quantity of output produced (Q).

TC = TVC + TFC
TC = $1,000 + $2,500
TC = $3,500

ATC = TC/Q
ATC = $3,500/500
ATC = $7

Therefore, the answer is C) $7.

Suppose That a Firm Is Currently Producing 500 Units of Output