Question:
The table shows total cost: [Output 0-7; TC: 100, 120, 130, 138, 160, 190, 238, 296]. What is the average variable cost of producing 6 units of output?
(1) Rs. 23
(2) Rs. 28
(3) Rs. 35
(4) Rs. 36
(5) Rs. 48
Correct Answer:
(1)
Answer Explanation:
Total Fixed Cost (TFC) is the cost at 0 output, which is 100. Total Cost (TC) at 6 units is 238. Total Variable Cost (TVC) at 6 units = TC – TFC = $238 – 100 = 138$. Average Variable Cost (AVC) = TVC / Quantity = $138 / 6 = 23$.
Topic: Costs of Production Year: 2021
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