QUESTION 3 The average total cost incurred by a firm is calculated by dividing:
ID: 1193296 • Letter: Q
Question
QUESTION 3
The average total cost incurred by a firm is calculated by dividing:
a.
total output by total cost.
b.
the change in total output by the change in the number of people employed.
c.
the change in total cost by the change in the quantity of output.
d.
total cost by total output.
e.
total output by the number of people employed.
a.
total output by total cost.
b.
the change in total output by the change in the number of people employed.
c.
the change in total cost by the change in the quantity of output.
d.
total cost by total output.
e.
total output by the number of people employed.
Explanation / Answer
Answer. d. Total Cost by total output
ATC = TC/Q or (1)
ATC = Average variable cost + Average fixed cost.
because TC = TFC + TVC (2)
putting 2into 1
ATC = (TFC + TVC ) / Q
= AFC + AVC