A firm produces 4,000 units of output using 500 workers.Marginal cost is $10,the wage rate is $160,and total fixed cost is $100,000.What is average variable cost?
A)$0.32
B)$16
C)$20
D)$1,280
E)none of the above

Question

Quizplus · Accepted Answer

Total variable cost = (Marginal cost x Units of output) = ($10 x 4,000) = $40,000
Total cost = Total fixed cost + Total variable cost = $100,000 + $40,000 = $140,000
Average variable cost = (Total variable cost / Units of output) = ($40,000 / 4,000) = $20. Therefore, the best choice is C.

A Firm Produces 4,000 Units of Output Using 500 Workers