If a corn farmer has a yield of 200 bushels per acre with total fixed costs of $200 per acre and total variable costs of $400 per acre, what is the average total cost of corn production per acre?

If a corn farmer has a yield of 200 bushels per acre with total fixed costs of $200 per acre and total variable costs of $400 per acre, what is the average total cost of corn production per acre?

• A. $2.00
• B. $3.00
• C. $4.00
• D. $5.00

Answer: (B)

Average total cost is the cost per unit of output, found by dividing total cost by the quantity produced. Here, total cost per acre equals fixed plus variable: 200 + 400 = 600 dollars. The acre yields 200 bushels, so the cost per bushel is 600 / 200 = 3 dollars. That yields $3.00 per bushel, which is the value shown. If you instead looked at total cost per acre, you’d have $600 per acre—a figure not in the answer options—so the question is asking for ATC per bushel, not per acre.

Average total cost is the cost per unit of output, found by dividing total cost by the quantity produced. Here, total cost per acre equals fixed plus variable: 200 + 400 = 600 dollars. The acre yields 200 bushels, so the cost per bushel is 600 / 200 = 3 dollars. That yields $3.00 per bushel, which is the value shown. If you instead looked at total cost per acre, you’d have $600 per acre—a figure not in the answer options—so the question is asking for ATC per bushel, not per acre.