Question

A firm's average total cost is $80, its average variable cost is $75, and its output is 50 units. Its total fixed cost is:

Answer 1

By the definition of the average total cost, we have:

$$ATC=AFC+AVC,$$ $$ATC=\dfrac{TFC}{Q}+AVC,$$ $$TFC=(ATC-AVC)Q,$$ $$TFC=(\$80-\$75)\cdot50=\$250.$$