Suppose the total cost of producing 40,000 flash drives is $120,000 and the fixed cost is $30,000.
a) What is the variable cost?
b) When output is 40,000 what the average variable cost and the average fixed cost?
c) Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.