Option b; Average fixed cost is $10 per unit.
Output produced = 200 units = Q
Average variable cost = $10 = AVC
Total Cost = $4000 = TC
Based on above, we can find:
Total variable cost = AVC * Q = $10 * 200 = $2000
Total fixed cost = Total cost - Total variable cost
Total fixed cost = $4000 - $2000 = $2000
Average fixed cost = Total fixed cost / Output produced
Average fixed cost = $2000 / 200 units = $10 per unit.
The cost of a company expense that remains constant regardless of whether more or fewer goods and services are produced or sold is referred to as a fixed cost. Regular outlays like rent, interest payments, and insurance are examples of fixed costs that aren't directly connected to production.
In general, fixed costs are indirect since they have nothing to do with how a business produces its products or renders its services. Shutdown points are typically used to cut back on fixed costs. These costs are one of two distinct business costs—the other being variable costs—that combined make up their overall costs.
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