Suppose a company has $400 of fixed costs and a constant marginal cost of 10 cents. What are average total costs (ATC) at: Instructions: Round your responses to two decimal places. a. Output of 10 units? b. Output of 100 units? $ c. Output of 1,000 units? $ < Prev 3 of 3 Next

Average total cost when output is 10 units is $40.10.

Average total cost when output is 100 units is $4.10.

Average total cost when output is 1000 units is $5.

Average total cost is the total cost divided by total number of output produced.

Average total cost = (total fixed cost + total variable cost) / output.

Average total cost when output is 10 units.

Total variable cost = $0.1 x 10 = $1

Total fixed cost = $400 + $1 = $401

ATC = $401 / 10 = $40.10

Average total cost when output is 100 units

Total variable cost = $0.1 x 100 = $10

Total fixed cost = $400 + $10 = $410

ATC = $410 / 100 = $4.10

Average total cost when output is 1,000 units

Total variable cost = $0.1 x 1000 = $100

Total fixed cost = $400 + $100 = $500

ATC = $500 / 1000 = $0.50

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Explanation:

The total cost is the sum of fixed costs and variable costs.

TC = FC + VC

Average total cost = Total cost/ quantity.

In the case, marginal costs of 10 cents imply that the business incurs a cost of 10 cents for every output. Output multiplied by 10 cents is equal to variable costs.

For output of 10 units,

Variable Costs = 10 x $0.1 = 1

Fixed cost = 400

Total cost =400 + 1= $401

Average total cost = $401/10

ATC= $40.1

For output of 100 units

Fixed cost =400

Variable cost =100 x 0.1 = $10

Total cost = $400 + 10 = $410

AVC= $410/100

AVC =$4.1

For output of 1000 units

Fc = $400

vc= 1000 x $0.1 = 100

Tc=400 +100= 500

AVC= $500/1000

AVC=  $0.5

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