{"id":204926,"date":"2025-03-22T18:27:40","date_gmt":"2025-03-22T18:27:40","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=204926"},"modified":"2025-03-22T18:50:35","modified_gmt":"2025-03-22T18:50:35","slug":"cindys-car-wash-has-average-variable-costs-of-2-and-average-total-costs-of-3-when-it-produces-100-units-of-output-car-washes","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/22\/cindys-car-wash-has-average-variable-costs-of-2-and-average-total-costs-of-3-when-it-produces-100-units-of-output-car-washes\/","title":{"rendered":"Cindy&#8217;s Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes)"},"content":{"rendered":"\n<p>Cindy&#8217;s Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes). The firm&#8217;s total variable cost is<\/p>\n\n\n\n<p>a. $100.<\/p>\n\n\n\n<p>b. $200.<\/p>\n\n\n\n<p>c. $300.<\/p>\n\n\n\n<p>d. $500.<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>To determine the <strong>total variable cost (TVC)<\/strong>, we use the formula:<\/p>\n\n\n\n<p>[<br>TVC = \\text{Average Variable Cost (AVC)} \\times \\text{Quantity (Q)}<br>]<\/p>\n\n\n\n<p>From the problem:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>AVC = $2<\/strong><\/li>\n\n\n\n<li><strong>Q = 100 (car washes)<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Now, applying the values:<\/p>\n\n\n\n<p>[<br>TVC = 2 \\times 100 = 200<br>]<\/p>\n\n\n\n<p>Thus, the correct answer is:<br><strong>b. $200.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p><strong>Understanding Variable Costs<\/strong><br>Variable costs are costs that change with the level of output. In this case, Cindy&#8217;s Car Wash incurs a cost of $2 per car wash for expenses that vary with production, such as water, soap, electricity, and labor.<\/p>\n\n\n\n<p><strong>Average Variable Cost and Total Variable Cost<\/strong><br>Average Variable Cost (AVC) is the cost per unit of output. The total variable cost (TVC) is calculated by multiplying AVC by the number of units produced. Since AVC is $2 and Cindy&#8217;s Car Wash produces 100 car washes, multiplying these values gives us a total variable cost of $200.<\/p>\n\n\n\n<p><strong>Role of Total Cost in Production Decisions<\/strong><br>We are also given that <strong>Average Total Cost (ATC) is $3<\/strong> at 100 units. ATC includes both fixed and variable costs:<\/p>\n\n\n\n<p>[<br>ATC = \\frac{TC}{Q}<br>]<\/p>\n\n\n\n<p>[<br>3 = \\frac{TC}{100}<br>]<\/p>\n\n\n\n<p>[<br>TC = 3 \\times 100 = 300<br>]<\/p>\n\n\n\n<p>Since <strong>Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC)<\/strong>, we can solve for <strong>TFC<\/strong>:<\/p>\n\n\n\n<p>[<br>TFC = TC &#8211; TVC = 300 &#8211; 200 = 100<br>]<\/p>\n\n\n\n<p>Thus, Cindy&#8217;s Car Wash has <strong>$100 in fixed costs<\/strong> (costs that do not change with output).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Conclusion<\/h3>\n\n\n\n<p>Understanding AVC and TVC helps businesses manage costs and set prices. Cindy\u2019s Car Wash must ensure its pricing covers at least $3 per wash to break even.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cindy&#8217;s Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes). The firm&#8217;s total variable cost is a. $100. b. $200. c. $300. d. $500. The correct answer and explanation is : To determine the total variable cost (TVC), we use the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-204926","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/204926","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=204926"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/204926\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=204926"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=204926"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=204926"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}