Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average variable costs of $50. The firm's total fixed costs are
A) $50.
B) $5,000.
C) $150.
D) $15,000.

Question

Quizplus · Accepted Answer

In the short run, the firm's total costs can be calculated as:
Total Costs = Total Fixed Costs + Total Variable Costs
Given that the firm is producing 100 units of output and has average variable costs of $50, the firm's total variable costs would be:
Total Variable Costs = Average Variable Costs * Quantity of Output
Total Variable Costs = $50 * 100
Total Variable Costs = $5,000
Since the firm's average total costs are $100 and we know that in the short run, average total cost is equal to the sum of average variable cost and average fixed cost, we can calculate the firm's total fixed costs as:
Total Fixed Costs = Average Total Costs * Quantity of Output - Total Variable Costs
Total Fixed Costs = $100 * 100 - $5,000
Total Fixed Costs = $10,000 - $5,000
Total Fixed Costs = $5,000
Therefore, the best choice is option B.

Assume That in the Short Run a Firm Is Producing