What is the average variable cost per bushel for the farmer given fixed costs of $200 per acre, variable costs of $400 per acre, and yield of 200 bushels per acre?

What is the average variable cost per bushel for the farmer given fixed costs of $200 per acre, variable costs of $400 per acre, and yield of 200 bushels per acre?

• A. $1.00
• B. $2.00
• C. $3.00
• D. $4.00

Answer: (B)

Average variable cost per bushel is found by dividing variable costs per acre by the yield per acre. Fixed costs don’t enter the AVC calculation. With variable costs of 400 dollars per acre and a yield of 200 bushels per acre, AVC = 400 / 200 = 2 dollars per bushel (or $2.00 per bushel). If you were asked for total cost per bushel, you’d include fixed costs as well: (200 + 400) / 200 = 3 dollars per bushel.

Average variable cost per bushel is found by dividing variable costs per acre by the yield per acre. Fixed costs don’t enter the AVC calculation. With variable costs of 400 dollars per acre and a yield of 200 bushels per acre, AVC = 400 / 200 = 2 dollars per bushel (or $2.00 per bushel). If you were asked for total cost per bushel, you’d include fixed costs as well: (200 + 400) / 200 = 3 dollars per bushel.