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Which of the following statements about fixed costs for digital products is true?
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10. The Costs of Production
Cost-Minimizing Combination of Labor and Capital
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Given the table above, what is the average variable cost (AVC) of producing 400 units of output?
A
AVC = Total Variable Cost divided by 400
B
AVC = Total Cost divided by 400
C
AVC = Total Variable Cost multiplied by 400
D
AVC = Total Fixed Cost divided by 400
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Identify the definition of Average Variable Cost (AVC), which is the variable cost per unit of output produced.
Recall the formula for AVC: \(\text{AVC} = \frac{\text{Total Variable Cost}}{\text{Quantity of Output}}\).
From the problem, note that the quantity of output is 400 units, so substitute this value into the denominator of the formula.
Locate the Total Variable Cost corresponding to producing 400 units from the given table or data.
Divide the Total Variable Cost by 400 to calculate the Average Variable Cost for producing 400 units.
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