Question

Tom’s Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal a. $80 b. $90 c. $100 d. $110

Answer 1

Answer:

The firm average total cost is $110

correct option is  d. $110

Explanation:

given data

total fixed costs = $300,000 per year

average variable cost = $80

tents = 10,000

to find out

we know that average total costs is sum of average fixed cost and average variable cost    .........................1

here

Average fixed cost = total fixed cost ÷  number of unit output

Average fixed cost = $\frac{300,000}{10,000}$

Average fixed cost = $30

so

average total costs = Average fixed cost  + average variable cost

average total costs = $30 + $80

average total costs = $110

correct option is  d. $110