Given that FC = N500, VC = N1,500, and Q = 50 units. Find the average cost of the product.
- N30
-
N40
- N10
- N20
The correct answer is: B
Explanation
The Average Cost is the per unit cost of production obtained by dividing the total cost (TC) by the total output (Q). Thus we have;
Average cost = Total cost ÷ Total output(quantity)
Total cost = fixed cost + variable cost
Average cost = 500 + 1500 ÷ 50
2000 ÷ 50 = 40