Multiple Choice
Refer to Figure 13-4. Which of the following figures best represents the total cost curve for a typical firm in the short run?
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10. The Costs of Production
Cost-Minimizing Combination of Labor and Capital
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Suppose a firm uses labor and capital to produce output, and the following table shows the total variable cost (TVC) for different levels of output. If the TVC for producing 5 units of output is \$100, what is the average variable cost (AVC) of producing 5 units?
A
\$15
B
\$20
C
\$5
D
\$25
Verified step by step guidance1
Understand that Average Variable Cost (AVC) is calculated by dividing the Total Variable Cost (TVC) by the quantity of output produced. The formula is: \(\\text{AVC} = \frac{\\text{TVC}}{Q}\), where \(Q\) is the quantity of output.
Identify the given values from the problem: TVC for producing 5 units is \$100, and the quantity \(Q\) is 5 units.
Substitute the given values into the AVC formula: \(\\text{AVC} = \frac{100}{5}\).
Perform the division to find the AVC per unit of output (note: do not calculate the final number here, just set up the expression).
Interpret the result as the cost per unit of output that varies with production, which helps the firm understand its variable cost efficiency at this output level.
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