If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11^th unit is $30, what do average fixed costs equal at 11 units of output?

Question

Quizplus · Accepted Answer

Average total cost = (Total cost) / (Quantity)

Quantity = 10 units
Average variable cost = $20
Therefore, average total cost - average variable cost = average fixed cost
$40 - $20 = $20, which is the average fixed cost at 10 units of output.

At 11 units of output, the marginal cost is $30, which is between the average variable cost ($20) and the average total cost ($40). This means that the average total cost is increasing but the average variable cost is decreasing.

To find the new average fixed cost, we can use the formula:
Average fixed cost = Average total cost - Average variable cost

Average fixed cost at 11 units of output = $40 - $20 = $20

Alternatively, we could calculate the total fixed costs and divide by the quantity, but we don't have enough information to do that.

If Average Total Costs Are $40 and Average Variable Cost