A firm produces 500 units of output at a total cost of ₦250,000. If the fixed cost is ₦50,000, what is the average variable cost per unit?
A₦500
B₦400CORRECT
C₦100
D₦300
GCEEconomicsProduction and Costs2024
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Why the answer is B, and why the others tempt you.
Total variable cost = Total cost − Fixed cost = ₦250,000 − ₦50,000 = ₦200,000. Average variable cost = Total variable cost ÷ Quantity = ₦200,000 ÷ 500 = ₦400. Option A (₦500) is the average total cost, a common distractor error.
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