If the TC (Total Cost) at 10 units of output is 55 and the Fixed Cost is 5, then the AVC (Average Variable Cost) at 10 units of output will be:
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- 2.5
- 6
- 5
- 11
The Correct Option is C
Solution and Explanation
- Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC)
- AVC = VC / Quantity (Q)
Given:
- TC = 55
- FC = 5
- Q = 10 units
Calculate VC: \[ VC = TC - FC = 55 - 5 = 50 \] Calculate AVC: \[ AVC = \frac{VC}{Q} = \frac{50}{10} = 5 \] Thus, the AVC at 10 units is 5, making option (3) correct. - Option (1) 2.5 is too low (implies VC = 25). - Option (2) 6 implies VC = 60, contradicting TC. - Option (4) 11 implies VC = 110, infeasible given TC = 55.
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