Question

Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $250. Her variable costs are $2,000 for the first thousand posters, $1,600 for the second thousand, and then $1,000 for each additional thousand posters. What is her AFC per poster (not per thousand!) if she prints 1,000 posters?

Answer 1

Answer: 0.25 per poster

Explanation:

Given that,

Karen runs a print shop,

Current market price = $1 per poster

Fixed costs = $250

Variable costs for the:

First thousand posters = $2,000

Second thousand posters = $1,600

$1,000 for each additional thousand posters.

Therefore,

$Average\ fixed\ cost\ for\ 1,000\ posters=\frac{Fixed\ cost}{No.\ of\ posters}$

$Average\ fixed\ cost\ for\ 1,000\ posters=\frac{250}{1,000}$

= 0.25 per poster