Question

Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal Group of answer choices $65 $75 $85 $95

Answer 1

Answer:

$95

Explanation:

average variable cost per unit = $65

average fixed cost per unit = $300,000 / 10,000 = $30

average total cost per unit = $95

Fixed costs do not vary if the production output changes, while variable costs move in the same direction as the production output, e.g. if output increases, variable costs increase as well.