If Average Total Costs Are $40 and Average Variable Cost

question 136

Multiple Choice

If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11^th unit is $30, what do average fixed costs equal at 11 units of output?

• A)$18.18
• B)$20.90
• C)$37.86
• D)$200.00

---

Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Incremental Basis

A method of calculating changes in costs or benefits that result from small variations in the quantity of output or input.

Differential Basis

A method of calculating or analyzing the difference in costs or revenues between two alternative actions.

Sunk Cost

A cost that cannot be changed by any present or future decision.