alleryA firm's total fixed cost is ₹ 1,000. Using AFC = TFC/Q, what is the average fixed cost when 8 units are produced?
A₹ 100.00
B₹ 142.86
C₹ 125.00
D₹ 111.11
Answer & Solution
Correct answer: C. ₹ 125.00
1. AFC = TFC / Q.
2. TFC = ₹ 1,000 and Q = 8.
3. AFC = 1000 / 8 = ₹ 125.00.
4. ₹ 100 is AFC at 10 units, ₹ 142.86 at 7 units, ₹ 111.11 at 9 units, so those Q values are wrong. Hence ₹ 125.00.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.6–7_
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