CA Foundation · Business Economics · Theory of Production and Cost
A firm's total cost rises from ₹9,000 at 100 units to ₹9,800 at 101 units, then to ₹10,500 at 102 units. Which statement is correct?
The marginal cost of the 101st unit is ₹800 and of the 102nd is ₹700, so marginal cost is falling. Marginal cost is the addition to total cost from one extra unit, found by subtracting successive total costs.
- AMarginal cost of the 101st unit is ₹800 and of the 102nd is ₹700, so MC is fallingCorrect
- BMarginal cost of the 101st unit is ₹9,800 and of the 102nd is ₹10,500
- CMarginal cost of the 101st unit is ₹800 and of the 102nd is ₹700, so MC is rising
- DMarginal cost of the 101st unit is ₹700 and of the 102nd is ₹800
Explanation
MC is the change in total cost for one more unit. 101st unit: 9,800 − 9,000 = ₹800. 102nd unit: 10,500 − 9,800 = ₹700. Since 700 is less than 800, MC is falling; the option saying rising misreads the numbers.
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