CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production
A firm's total fixed cost is ₹40,000 and its average variable cost is ₹12 per unit at every level of output. What is the average total cost at an output of 1,000 units?
Average total cost is average fixed cost plus average variable cost. Average fixed cost is 40,000 divided by 1,000, which is ₹40. Adding the ₹12 average variable cost gives ₹52 per unit.
- A₹40
- B₹52Correct
- C₹12
- D₹28
Explanation
AFC = 40,000/1,000 = ₹40. ATC = AFC + AVC = 40 + 12 = ₹52. Choosing ₹40 ignores variable cost; ₹12 ignores fixed cost.
Did you get it right without looking?
One question tells you little. A timed set on Cost of Production shows your real accuracy, how long you take and where you lose marks.
More Cost of Production questions
- Mehta Textiles finds that at its current output, average total cost is falling as production rises. Which statement about marginal cost (MC)…
- As output expands in the short run, the vertical distance between the average total cost curve and the average variable cost curve will:
- In the long run, the long-run average cost (LAC) curve of a firm is best described as the curve that:
- A Pune bakery has total fixed cost of Rs 12,000 per month. At an output of 400 loaves, total variable cost is Rs 20,000. What is the average…
- As output increases in the short run, the vertical distance between the total cost curve and the total variable cost curve is:
- The U-shape of the long-run average cost curve is mainly explained by: