At zero level of output, which of the fo

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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Production and Costs

Question:

At zero level of output, which of the following will be undefined?

Options:

Average Fixed Cost and Average Variable Cost

Short Run Marginal Cost

Short Run Average Cost

All of above

Correct Answer:

All of above

Explanation:

The correct answer is option 4: All of above

At zero level of output, the following cost measures become undefined because they involve division by zero:

Average Fixed Cost (AFC) and Average Variable Cost (AVC)
- Formula:
- $AFC=TFC/Q,$
- $AVC=TVC/Q$
- Since Q = 0, division by zero occurs, making AFC and AVC undefined.
Short-Run Marginal Cost (SMC)
- Formula: $SMC=ΔTC/ΔQ$
- If output is zero, marginal cost cannot be calculated because there is no additional unit of output to compare changes in total cost.
Short-Run Average Cost (SAC)
- Formula: $SAC=TC/Q$
- Since Q = 0, division by zero occurs, making SAC undefined.