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WAEC Economics 2006 Question 7

Question 7

Theory of Costs and Revenue

If the fixed cost of a firm is 800 Naira and its variable cost is 2,700 Naira while its total output is 100 units, what is the average cost of the firm?

  1. A.25 Naira
  2. B.35 Naira
  3. C.45 Naira
  4. D.50 Naira
Show the answer and explanation

Answer: B (35 Naira)

Explanation

Total cost = 800 + 2,700 = 3,500 Naira. Average cost = 3,500 ÷ 100 = 35 Naira.