At an output of 7 units a firm has total fixed cost ₹ 1,000 and total …

Question

At an output of 7 units a firm has total fixed cost ₹ 1,000 and total variable cost ₹ 400. Using AVC = TVC/Q, the average variable cost is:

Accepted Answer

A. ₹ 57.14

1. AVC = TVC / Q.
2. TVC = ₹ 400 and Q = 7.
3. AVC = 400 / 7 = ₹ 57.14.
4. ₹ 142.86 is AFC (1000/7), ₹ 200 is ATC (1400/7), and ₹ 75 is the marginal cost of the 7th unit, so they answer different questions. Hence ₹ 57.14.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.6–7_

Answer

₹ 142.86

Answer

₹ 200.00

Answer

₹ 75.00

At an output of 7 units a firm has total fixed cost ₹ 1,000 and total variable cost ₹ 400. Using AVC = TVC/Q, the average variable cost is:

Keep practising Unit 3: Production, Cost & Perfect Competition