Question

A firm has a variable cost of Rs. 100 at 5 units of output. If fixed cost is Rs. 40 what will be the average total cost at 5 units of output–
(A) Rs. 28
(B) Rs. 60
(C) Rs. 12
(D) Rs. 140

Answer 1

Given:

A firm has a variable cost of Rs. 100 at 5 units of output.

To find:

If fixed cost is Rs. 40, what will be the average total cost at 5 units of output

Solution:

The formula used to calculate the average total cost is,

Average total cost = TC/Q

where TC = TVC + TVF

From given, we have,

A firm has a variable cost of Rs. 100 at 5 units of output. The fixed cost is Rs. 40

Average total cost = (TVC + TVF) / Q

Average total cost = (100 + 40) / 5

= 140 / 5

= 28

Therefore, the average total cost at 5 units of output is Rs. 28

Option (A) Rs. 28 is correct

Answer 2

Answer:

Total variable cost =100

total fixed cost. =40.

So total cost =tvc+tfc=100+40=140