Question

During the past year, a firm produced $10,000$laptop computers. Its total costs were $\backslash (5$ million, and its fixed costs were $\backslash )2$ million. What are the average variable costs of this firm?

Short answer

The average variable costs of a firm is$\$300$.

Step-by-step solution

Introduction

If such price from its products is below incremental cost curve so at profit-maximizing output level, a company can also opt to dissolve (or, more generally if it sells at multiple prices, its average revenue is a smaller amount than AVC). Developing everything won't create enough capital to afford the operating costs; producing anything would add deficits (costs in more than revenues) to the prices that'd inevitably be faced (the fixed costs). The firm just loses maintenance expenses from not delivering.

Explanation

Average variable cost is calculated by considering total variable costand also the number of units produced.

If the entire cost is $\$5$ million, and glued cost is $\$2$million, then total variable cost equals to $\$3$million ( total variable cost = total cost - total fixed cost).

Substitution

The followingmay be a measurement of average variable cost.
$\text{Average variable cost}=\frac{\text{Total variable cost}}{\text{Number of units produced}}$

$=\frac{\mathrm{\$}3\text{million}}{10,000}$

$=\$300$

Thus, the typical variable cost is $\$300$considering total variable cost and therefore the number of units produced.