Given below are two statements:
Assertion (A): If TC rises from Rs 140 to Rs 165 as output goes from 7 to 8 units, the SMC of the 8th unit is Rs 25, whatever the TFC.
Reason (R): In the short run, total fixed cost does not change as output changes.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): If TC rises from Rs 140 to Rs 165 as output goes from 7 to 8 units, the SMC of the 8th unit is Rs 25, whatever the TFC. — True. SMC = change in TC = 165 − 140 = Rs 25.
Reason (R): In the short run, total fixed cost does not change as output changes. — True. TFC stays the same at every level of output.
Why R explains A?
Because TFC does not change, the whole change in TC is the change in TVC. TFC is part of both 140 and 165, so it cancels out in the difference. That is why the SMC is Rs 25 whatever the TFC is.
NCERT (2026-27): “3.7.1 Short Run Costs … Just like the case of marginal product, marginal cost also is undefined at zero level of output. It is important to note here that in the short run, fixed cost cannot be changed. When we change the level of output, whatever change occurs to total cost is entirely due to the change in total variable cost. So in the short run, marginal cost is the increase in TVC due to increase in production of one extra unit of output. …” |