The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to A. $18.00. B. $19.60. C. $16.40. D. $17.00.

Question

Business

Madison Salas

8 August, 19:29

The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to A. $18.00. B. $19.60. C. $16.40. D. $17.00.

+4

Answers (1)

Know the Answer?

Titus Calhoun · Answer 1

Answer: the correct answer is A. $18.00

Explanation:

The question is when the company produces 150 units so the average costs is $24.50

150 units Average costs $24.50

151 units Average costs $24.55

Total costs = Units * average cost per unit (150 * $24.50) = $3,675.00

Total Cost = Fixed costs + Variable costs

$3,675 = $975 + Variable costs

Variable costs = $3,675 - $975 = $2,700

Average Variable costs per unit $2,700/150 = $18