The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.2 MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 23.2.What is the firm's total fixed cost at the profit-maximizing output level?

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.2  MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 23.2.What is the firm's total fixed cost at the profit-maximizing output level?

Quizplus · Accepted Answer

At the profit-maximizing level of output, the firm produces where marginal cost equals marginal revenue. This occurs at an output of 300 units, where the marginal cost is $10 and marginal revenue is $20. 
At this output level, the average variable cost is $7 and the average total cost is $8. To find the total fixed cost, we can subtract the total variable cost (which is equal to the average variable cost multiplied by the output level) from the total cost (which is equal to the average total cost multiplied by the output level). 
Total variable cost = $7 × 300 = $2100
Total cost = $8 × 300 = $2400
Therefore, total fixed cost = $2400 − $2100 = $300. 
So, the answer is B.

The Figure Given Below Shows the Revenue and Cost Curves