Questions: Calculate the average variable cost (AVC), average total cost and average fixed cost (AFC) for a quantity of 3 cars and a quantity of 8 cars. Round your answer to the nearest whole dollar.

To calculate the average variable cost (AVC), average total cost (ATC), and average fixed cost (AFC) for producing 3 and 8 cars, we need to follow these steps:

• Total Cost (TC): The total cost of production, which includes both fixed and variable costs.
• Fixed Cost (FC): The cost that does not change with the level of output. From the table, the fixed cost is the total cost when the quantity is zero, which is $500,000.
• Variable Cost (VC): The cost that changes with the level of output. It can be calculated as TC - FC.
• Average Variable Cost (AVC): VC divided by the quantity of output.
• Average Total Cost (ATC): TC divided by the quantity of output.
• Average Fixed Cost (AFC): FC divided by the quantity of output.

1. Total Cost (TC) for 3 cars: $570,000
2. Fixed Cost (FC): $500,000
3. Variable Cost (VC) for 3 cars: $570,000 - $500,000 = $70,000
4. Average Variable Cost (AVC): $70,000 / 3 = $23,333 (rounded to the nearest whole dollar)
5. Average Total Cost (ATC): $570,000 / 3 = $190,000
6. Average Fixed Cost (AFC): $500,000 / 3 = $166,667 (rounded to the nearest whole dollar)

1. Total Cost (TC) for 8 cars: $800,000
2. Fixed Cost (FC): $500,000
3. Variable Cost (VC) for 8 cars: $800,000 - $500,000 = $300,000
4. Average Variable Cost (AVC): $300,000 / 8 = $37,500
5. Average Total Cost (ATC): $800,000 / 8 = $100,000
6. Average Fixed Cost (AFC): $500,000 / 8 = $62,500

• For 3 cars:

  • AVC: $23,333
  • ATC: $190,000
  • AFC: $166,667

• For 8 cars:

  • AVC: $37,500
  • ATC: $100,000
  • AFC: $62,500

These calculations provide the average costs associated with producing 3 and 8 cars based on the given total cost data.