Question

If average fixed cost is 40 Rs. And average variable cost is 80 Rs. For an output level of 10, then the total cost is.

Answer 1

Answer:

ANSWER

(i) AFC (of fourth unit)=Rs.20;

Note: This is because, TC=TFC+TVC and thus in 1st Unit, 80(TC)=80(TFC)+0(TVC).

(ii) AVC (of fourth unit)=Rs.19;

Note: This is because, AVC=

Q

TC

and thus in 4th Unit, 19(AVC)=

4(Q)

156(TC)

(iii) Marginal cost (of fourth unit)=Rs.16

Note: This is because, MC=TC

(

n+1)−TC

n

and thus in 4th Unit, 16(MC)=156(TC

(

n+1))−140(TC

n

)