Home › CA Foundation › Business Economics › Theory of Cost › With which one of the following costs is the con…
With which one of the following costs is the concept of marginal cost most closely related?
AVariable cost
BFixed cost
COpportunity cost
DReplacement cost
Answer & Solution
Correct answer: A. Variable cost
1. Marginal cost is the change in total cost from producing one more unit.
2. Total cost changes only through its variable component, since fixed cost is constant.
3. So marginal cost is driven by, and most closely related to, variable cost.
4. It is independent of fixed cost (B), and opportunity (C) and replacement (D) costs are distinct concepts. Hence variable cost.
_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 avEmpirical 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 cosThe LAC curve is tangent to the minimum point of a short-run average cost curve at only on