Question

The table shows the production of a firm.

Production (tonnes) Total Cost ($)

0 20

1 30

2 35

3 40

4 45

5 50

Calculate the Average Variable Cost (AVC) of producing 5 tonnes of output.

Answer 1

Solution:

Total Cost (TC) = Fixed Cost + Variable Cost

Fixed cost = 20

Average Variable Cost (AVC) = $\frac{Variable\; cost}{Output}$

The variable cost for producing 5 tonnes of output = 30

AVC = $\frac{30}{5} = 6$

AVC of producing 5 tonnes of output = 6