Assume that fixed costs are $10. What is the average total cost of 4 cakes?
Total cost of production, especially in the short run, involves both fixed costs and variable costs. Fixed costs are expenses that do not vary with the level of production. Variable costs, on the other hand, increase with production. If variable cost is constant, then average total cost will decline as more is produced.
Answer and Explanation: 1
Average total cost is computed as follows:
- average total cost = total cost / quantity of production
Total cost is the sum of variable costs and...
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fromChapter 3 / Lesson 23
Learn what is the average total cost. Learn its use, its formula, and how to apply it.