Question

. Total fixed cost of a firm is 100. Its average variable cost at different levels of output is given below. Calculate total cost and marginal cost at each level of output :
Output (Units) Average Less
more : 1 2 3 4
cost(₹) : 60 56 60 64​

Answer 1

When the output is 1,the Total Cost(TC) is 160 and Marginal Cost(MC) is also 160.

When the output is 2,the TC is 156 and the MC is -4.

When the output is 3,TC is 160 and the MC is 4.

When the output is 4,TC is 164 and MC is 4.

Explanation:

The Marginal Cost of production(MC) basically refers to the change in total cost(TC) for one more unit of production of output or goods and services.Here the total fixed cost of the firm(TFC) is 100 and hence,the MC will only depend on the total variable cost(TVC) at each level of production given except the 1st unit of production.The change in TC will only be affected by change in TVC.

When the output is 1,the TC=$(100+60)=160$ and MC=$(160-0)=160$

When the output is 2,the TC=$(100+56)=156$ and the MC=$(156-160)=-4$

When the output is 3,TC=$(100+60)=160$ and the MC=$(160-156)=4$

When the output is 4,TC=$(100+64)=164$ and MC=$(164-160)=4$