CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production
For a firm, total cost at 10 units is Rs 1,900 and average variable cost at 10 units is Rs 150. If total cost at 11 units is Rs 2,060, what is the total fixed cost and the marginal cost of the 11th unit?
Fixed cost is Rs 400 and marginal cost is Rs 160. Variable cost at 10 units is 150 times 10, or Rs 1,500, so fixed cost is 1,900 minus 1,500. Marginal cost is the rise in total cost from 1,900 to 2,060 for the 11th unit.
- AFixed cost Rs 400; marginal cost Rs 160Correct
- BFixed cost Rs 150; marginal cost Rs 160
- CFixed cost Rs 400; marginal cost Rs 187
- DFixed cost Rs 1,500; marginal cost Rs 160
Explanation
Total variable cost at 10 units = 150 x 10 = Rs 1,500. Fixed cost = 1,900 - 1,500 = Rs 400. Marginal cost of the 11th unit = 2,060 - 1,900 = Rs 160. Rs 1,500 is the variable cost, not fixed cost, and Rs 187 wrongly divides 2,060 by 11.
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