A firm is producing 20 units. At this level of output ,the ATC and AVC are respectively equal to Rs.40 and Rs.37. Find out the total fixed cost of the firm.

Dear Student, the total fixed cost of a firm will be calculated in the following manner:
We know, Total Fixed Cost is equal to Average Fixed Cost multiplied by the units of output produced.
or, TFC = AFC x Units of Output
Also, ATC = AFC + AVC
So, in order to find Average Fixed Cost,
AFC = ATC - AVC = 40 - 37 = 3
Thus, TFC = 3 x 20 = 60
The total fixed cost of the firm is 60.

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atc * output - atc * output

* means multiplication

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