Question

Suppose a company has $400 of fixed costs and a constant marginal cost of 10 cents. What are average total costs (ATC) at: Instructions:

Round your responses to two decimal places.

a. Output of 10 units?

b. Output of 100 units?

c. Output of 1,000 units?

Answer 1

a)	variable cost		10*.10=		1
	fixed cost				400
	total cost				401
	average cost per unit		401/10
			40.1	answer
b)	variable cost		100*.10=		10
	fixed cost				400
	total cost				410
	average cost per unit		410/100
			4.1	answer
c)	variable cost		1000*.10=		100
	fixed cost				400
	total cost				500
	average cost per unit		500/1000
			0.5	answer