Which of the following formula is incorrect?
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: SAC = AVC - AFC
Option 2 is incorrect- It should be SAC = AVC + AFC
Short run average cost (SAC)
Average variable cost (AVC)
Average fixed cost (AFC)
SAC stands for Short-Run Average Cost. It's calculated by dividing the Total Cost (TC) by the Output (Q). So, SAC = TC / Q (Option 1 is correct).
SAC = AVC + AFC or AVC = SAC - AFC (Option 3 is also correct).
Option 2 is incorrect.