Home › CA Foundation › Business Economics › Theory of Cost › A firm's total cost is ₹ 200 when it produces 5 …
A firm's total cost is ₹ 200 when it produces 5 units and ₹ 320 when it produces 10 units. The marginal cost per unit over this range, using MC = ΔTC/ΔQ, is:
A₹ 24
B₹ 50
C₹ 120
D₹ 32
Answer & Solution
Correct answer: A. ₹ 24
1. MC = ΔTC / ΔQ.
2. ΔTC = 320 − 200 = ₹ 120 and ΔQ = 10 − 5 = 5 units.
3. MC = 120 / 5 = ₹ 24 per unit.
4. ₹ 120 (C) is total ΔTC not per unit, ₹ 50 (B) ignores the 5-unit jump, and ₹ 32 (D) is ATC at 10 units. Hence ₹ 24.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.6_
Related questions
A firm's average variable cost falls as output rises from zero toward normal capacity but In the short run, as the output of a firm steadily increases, its average fixed cost (AFC)Which one of the following is an example of an implicit cost?Which one of the following is an example of an explicit cost?Which of the following statements about the relationship between marginal cost (MC) and avWith which one of the following costs is the concept of marginal cost most closely relatedEmpirical studies of modern firms suggest the long-run average cost curve is often 'L-shapThe 'U' shape of the long-run average cost curve, unlike that of the short-run average cos