Question

Consider the following: Alex is one of the leading widget producers in the country. His total costs amount to $10,000, total fixed costs are $2,000, and average variable costs are $400. How many widgets is Alex producing

Answer 1

Answer:

The correct answer is 20 units.

Explanation:

According to the scenario, the given data are as follows:

Total cost = $10,000

Total fixed cost = $2,000

Average variable cost = $400

So, Total variable cost = Total cost - Total fixed cost

= $10,000 - $2,000 = $8,000

So, we can calculate the total number of widgets producing by using following formula:

Units producing = Total variable cost  ÷ average variable cost

= $8,000 ÷ $400

= 20 units