This answer results from interpreting the amounts in the variable cost column to be the variable cost per unit at each production level. The amounts in the variable cost column are the total variable costs at each production level, not the variable cost per unit at each production level.
This is the total cost at an output level of 3 units. The question asks for the average total cost, which means the average total cost per unit .
This is the average fixed cost per unit at an output level of 3. The question asks for the average total cost per unit at that output level.
The total cost at an output level of 3 units is $2,000 fixed costs plus $550 variable costs, for a total of $2,550. The average total cost per unit is $2,550 divided by 3 units, or $850.
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Auburn's average total cost at an output level of 3 units is
