Suppose that a factory produces exactly two automobiles. The fixed cost is $20,000. The (total) variable cost is $10,000. The average cost per automobile is

To answer this question, we first need to understand what fixed costs, variable costs, and average costs are.

1. Fixed costs are costs that do not change with the level of output. In this case, the fixed cost is $20,000, which the factory has to pay regardless of how many automobiles it produces.

2. Variable costs are costs that change with the level of output. Here, the variable cost is $10,000. This cost can increase or decrease depending on how many automobiles the factory produces.

3. The average cost is the total cost (fixed cost plus variable cost) divided by the number of units produced.

Now, let's calculate the average cost per automobile:

Step 1: Add the fixed cost and the variable cost to get the total cost. $20,000 (fixed cost) +$10,000 (variable cost) = $30,000 (total cost)

Step 2: Divide the total cost by the number of automobiles produced to get the average cost per automobile. $30,000 (total cost) ÷ 2 (number of automobiles) =$15,000

So, the average cost per automobile is $15,000.