Match List-I with List-II for the short run cost curves of a firm:
| List-I | List-II | ||
|---|---|---|---|
| (A) | SAC is falling | (I) | SMC cuts SAC from below |
| (B) | SAC is rising | (II) | Total variable cost at that level |
| (C) | Minimum point of SAC | (III) | SMC is greater than SAC |
| (D) | Sum of SMCs up to an output level | (IV) | SMC is less than SAC |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A)-(IV), (B)-(III), (C)-(I), (D)-(II)
SMC pulls SAC: when SMC is below SAC, SAC falls; when it is above, SAC rises. They meet at the lowest point of SAC.
| List-I | List-II | Reason |
|---|---|---|
| (A) SAC is falling | (IV) SMC is less than SAC | A cost below the average pulls the average down. |
| (B) SAC is rising | (III) SMC is greater than SAC | A cost above the average pulls the average up. |
| (C) Minimum point of SAC | (I) SMC cuts SAC from below | SMC crosses SAC from below at its minimum point. |
| (D) Sum of SMCs up to an output level | (II) Total variable cost at that level | Fixed cost does not change, so the marginal costs add up to TVC. |
NCERT (2026-27): “Shapes of the Short Run Cost Curves … Similar to the case of AVC and SMC, as long as SAC is falling, SMC is less than the SAC. When SAC is rising, SMC is greater than the SAC. SMC curve cuts the SAC curve from below at the minimum point of SAC.” “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. For any level of output, the sum of marginal costs up to that level gives us the total variable cost at that level.” |