Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 11, Problem 4P
To determine
Concept Introduction:
Here,
- AFC is the average fixed cost.
- AVC is the
average variable cost . - ATC is the average total cost.
Average fixed cost (AFC): Fixed cost is the cost which is constant for the firm irrespective of the output produced by the firm. So the AFC is the fixed cost per unit produced by the firm. The formula to calculate the average fixed cost is:
Here,
- AFC is the average fixed cost
- TFC is the total fixed cost
- Q is the quantity of output.
Average variable cost: Variable cost is not a constant cost for the firm, it changes with the change in output. So the AVC is a per unit cost of that variable input. It is calculated as follows:
Here,
- AVC is the average variable cost
- TFC is the total fixed cost
- Q is the quantity of output.
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