Situation 21-2
Alejandro is one of the leading widget producers in the country. At his current level of production, his total costs amount to $5,000, total fixed costs are $2,000, and average total costs are $250.
Refer to Situation 21-2. What are Alejandro's average variable costs at the present level of production?
A)$60
B)$150
C)$100
D)$200
E)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

Average total costs = total costs / level of production
$250 = $5,000 / level of production
Level of production = 20
Average variable costs = (total costs - total fixed costs) / level of production
Average variable costs = ($5,000 - $2,000) / 20 = $150

Situation 21-2 Alejandro Is One of the Leading Widget Producers in the in the Country