The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal
A)$10
B)$15
C)$100
D)$150

Question

Quizplus · Accepted Answer

Average total cost (ATC) = Total cost / Quantity
Since total fixed cost is $100,000 per year and the average variable cost is $5 for 10,000 widgets, the total variable cost can be calculated as follows:
Total variable cost = Average variable cost * Quantity = $5 * 10,000 = $50,000
The total cost (fixed cost + variable cost) is $150,000. 
Therefore, the average total cost (ATC) is $150,000 / 10,000 = $15. 
Thus, the best choice is B.

The Wacky Widget Company Has Total Fixed Costs of $100,000