Question 1. Briefly explain the concept of the cost function.[1 Mark] Question 2. What are total fixed cost, total variable cost and total cost of a firm? How are they related? Question 3. What are the average fixed cost, average variable cost and average cost of a firm? How are they
related?[3-4 Marks] Question 4. Can there be some fixed cost in the long run? If not, why? [1 Mark] Question 5. What does the average fixed cost curve Question 6. What do the short run marginal cost, average variable cost and short run average cost curves look like?[1 Mark] Question 7. Why does SMC curve cut AVC curve at the minimum point of AVC curve?[3 Marks] Question 8. At which point does the SMC
curve cut the SAC curve? Give reason in support of your answer.[3 Marks] Question 9. Why is the short run marginal cost curve U- Shaped? [3 Marks] (i) As we know the shape of MC depends on the shape of TVC or TC. Let us suppose TVC. (ii) Initially, TVC increases at a diminishing rate (Total Product increases at Increasing rate), which makes the gap of TVC, i.e. MC to fall. (iii) Thereafter, TVC increases at an increasing rate( Total Product increases at diminishing rate) which makes the marginal cost to rise. (iv) So, from inverse S-shape TVC curve, we derive U-shape MC curve. Question 10. What do the long run marginal cost and average cost curves look like? Question 11. The following table shows the total
cost schedule of a firm. What is the total fixed cost schedule of this firm? Answer: The total fixed cost will be the same at all the levels of output ranging from zero to six. For zero output, total cost is ? 10. At zero output, total variable cost will be zero. Hence, Rs. 10 represents total fixed cost at all levels of output. Question 12. The following table gives the total cost schedule of a firm. It Is also given that the
average fixed cost at 4 units of output is Rs. 5. Find the TVC, TFC. AVC, AFC, SAC and SMC schedules of the firm for the corresponding values of output.[6 Marks] Answer: Question 13. A firm’s SMC schedule is shown in the following table. The total fixed cost of the firm is Rs. 100. Find the TVC, TC, AVC and SAC schedules of the firm.[6 Marks] Answer: MORE QUESTIONS SOLVEDI. Very Short Answer Type Questions (1
Mark) Question 2. Give two examples of fixed cost.[
CBSE 2013] Question 3. Give two examples of variable costs. Question 4. Why is average total cost greater than average variable cost? Question 5. What is meant by
total cost? Question 6. Why are TC and TVC curves parallel to each other? Question 7. How does the total fixed cost change when
output changes? [CBSE 2003] Question 8. Give the meaning of marginal cost. [CBSE, Sample Paper 2010] Question 9. How is MC related to TFC? Question 10. How is TVC derived from MC schedule? Question 11. What does the area under marginal cost curve show? Question 12. Can AC be less than MC when AC is rising? Question 13. When AC curve slopes downwards, what will be the position of MC curve? Question 14. What happens to AC when MC is equal to AC? Question 15. Can AC and AVC curves touch each other? Question 16. Give two examples of explicit cost. Question 17. Give two examples of implicit cost of a firm. Question 18. What is the behaviour of Total Variable Cost, as output increases? [AI 2012] Question 19. If it is given that the total variable cost for producing 15 units of output is Rs. 3000 and for 16 units is Rs. 3,500. Find the value of Marginal Cost. [CBSE, Sample Paper 2016] II. Multiple Choice Questions (1 Mark) Question 2. Which one of the following cost curves is never ‘U’ shaped? Question 3. Total cost in the short run is classified into fixed costs and variable costs. Which one of the following is a variable cost? Question 4. In the short run, when the output of a firm increases, its average fixed cost: Question 5. Which one of the following statements Question 6. Which one of the following statements is an example of “explicit cost”? Question 7. Which one of the following statements Question 8. Marginal cost is defined as: Question 9. Which one of the following statements is true to the relationship between marginal cost function and average cost function? Question 10. Which one of the following statements is true to the relationship among the average cost functions? Question 11. Which one of the following elements is not a determinant of the firm’s
cost function? Question 12. Which one of the following statements is correct concerning the relationships among the firm’s cost functions? Question 13. Suppose output increases in the short run, than the Total cost will: Question 14. A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 4 units of output? Question 15. If marginal cost equals to average total cost, Question 16. When marginal costs are below Question 17. If the average cost is falling, Question 18. The difference between average total cost and average
variable cost: Question 19. If the total cost curve is parallel to X-axis, marginal cost will: Question 20. The total cost at 5 units of output is Rs. 30. The fixed cost is Rs. 5. The average variable cost at 5 units of output is: [CBSE Sample Paper 2014] III. Short Answer Type Questions (3-4 Marks) Question 2. What is meant by variable (prime) cost of a firm? Give examples. [CBSE 2004 C; AI 2004] Question 3. Explain the behaviour of aver age fixed cost using numerical example. [CBSE 2013C] AFC falls as output increases because \(AFC=\frac { TFC }{ Output }\) and TFC remains constant.So, as output increases, TFC remains constant, AFC falls. Question 4. Distinguish between variable cost and fixed cost. Give two examples of each.[AI 2004, 08; CBSE 99C, 2000C] Question 5. Why is AC curve U-shaped in short run? Or (iii) Thereafter, total cost (TC) increases at increasing rate (Total Product increases at diminishing rate), which makes the average cost (AC) to rise. This type of production behaviour shows operation of law of variable proportion. Question 6. An individual is both the owner and the manager of a shop taken on rent. Identify implicit cost and explicit cost from this information. Explain. [CBSE 2012] Question 7. State the distinction between explicit
each.Give an example of each? Question 8. A producer starts a business by investing his own savings and hiring the labour. Identify implicit and explicit costs from this information. Explain. [AI 2012] Question 9. A farmer takes a
farm on rent and carries on farming with the help of his family members. Identify explicit and implicit costs from this information. Explain. [AI 2012] Question 10. Explain the relationship between AC and MC with the help of a diagram. Answer: (i) As long as MC is below AC, AC curve falls till their intersection at point E. (ii) When MC curve comes to fall, it falls more rapidly than AC curve and reaches its minimum point B earlier than the AC curve reaches its minimum point E. Therefore, MC curve is rising from B to E whereas AC curve is still falling from A to E. (iii) When MC curve is rising, it cuts the AC curve at its minimum point E and after that point MC is above than AC. Question 11. Define cost. State the relation between marginal cost and average variable cost. [CBSE 2015] Question 12. What is the behaviour of (a) Average Fixed Cost and (b) Average Variable Cost as more and more units of a good are produced? [A1 2015] Question 13. Can MC increase when AC falls? Question 14. Find out the total fixed cost in the following: Answer: The total fixed cost will be the same at all the levels of output, ranging from zero to six. For zero output, total cost is Rs 120. At zero output, total variable cost will be zero. Hence, Rs 120 represents total fixed cost at all levels of output. NCERT SolutionsAccountancyBusiness StudiesMicro EconomicsCommerce How do you calculate average fixed cost per unit?The average fixed cost of a product can be calculated by dividing the total fixed costs by the number of production units over a fixed period. The division method is useful if you only want to determine how your fixed costs affect the fixed cost per unit.
What is the formula for average fixed cost?AFC = Total fixed cost/Output (Q)
Similarly, if the factory produces 1,000 pens, then the cost of a unit will be ₹5/-, and if the total production is 5,000 pens, then the price will come down to ₹1/- per unit.
What is the average fixed cost of producing 8 units of output?If you know that with 8 units of output, average fixed cost is INR 12.50 and average variable cost is INR 81.25, then total cost at this output level is. No worries!
What is the average fixed cost when output is 5?The correct option is a. $4.
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