Which of the following statement (s) is/are correct?

Statement 1:  Average fixed cost is independent of the amount of output produced and remains constant for all levels of production.

Statement 2: The TVC at a particular level of output is given by the area under the SMC curve up to that level.

Only Statement 2 is correct.

The correct answer is option 2: Only Statement 2 is correct.

Statement 1: "Average fixed cost is independent of the amount of output produced and remains constant for all levels of production." Incorrect

• AFC (Average Fixed Cost) = TFC / Q
• Since TFC (Total Fixed Cost) is constant, AFC decreases as output (Q) increases.
• AFC is not constant; it declines as output increases and follows a rectangular hyperbola.
  ✔ Thus, this statement is incorrect.

Statement 2: "The TVC at a particular level of output is given by the area under the SMC curve up to that level."  Correct

• Short-Run Marginal Cost (SMC) = ΔTVC / ΔQ
• TVC (Total Variable Cost) is obtained by summing all marginal costs (SMC) over different levels of output.
• Graphically, TVC is the area under the SMC curve up to that level of output.