Economics help!! How to calculate average fixed cost?
Average fixed cost is $200 Average total cost is equal to average fixed cost plus average variable cost, since the two components of total cost are fixed cost and variable cost. You are given the numbers that directly fit this equation: Since ATC = AFC + AVC, then $800 = AFC + $600; AFC = $200 You can double check this by using the longer method of figuring total cost, then total fixed cost, then average fixed cost: Total cost would be average total cost times units. That would be $800 x 40, or $32,000 Of this amount, total variable costs account for $600 x 40, or $24,000 That leaves $8,000 for total fixed costs. At 40 units, average fixed cost would be $8,000 divided by 40, or $200 Marginal costs are irrelevant to the question; they do not factor into the calculations for fixed costs. They only relate to the change in total variable costs associated with the last unit produced.
