A firm’s total cost (TC) schedule is given below. Its average fixed cost at 4 units of output is Rs 4.
| Output (units) | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| TC (Rs) | 40 | 52 | 60 | 72 |
Which of the following is NOT correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The AVC at 4 units is Rs 18.
Given:
TC at 1, 2, 3, 4 units = Rs 40, 52, 60, 72
AFC at 4 units = Rs 4
First find TFC, then TVC = TC − TFC.
\( TFC = AFC \times q = 4 \times 4 = 16 \)
\( TVC = 24,\ 36,\ 44,\ 56 \)
Option (1) The AVC at 3 units is Rs 14.67. — True. \( AVC = 44/3 = 14.67 \)
Option (2) The AVC at 4 units is Rs 18. — False. \( AVC = 56/4 = 14 \). Rs 18 is the SAC at 4 units (72/4).
Option (3) The total fixed cost is Rs 16. — True. TFC = 4 × 4 = 16.
Option (4) The SMC of the 3rd unit is Rs 8. — True. \( SMC = 60 - 52 = 8 \)
NCERT (2026-27): “Shapes of the Short Run Cost Curves … Figure 3.4 shows the shape of average fixed cost curve for a typical firm. We measure output along the horizontal axis and AFC along the vertical axis. At q1 level of output, we get the corresponding average fixed cost at F. The TFC can be calculated as …”
“3.7.1 Short Run Costs … Similarly, the average variable cost (AVC) is defined as the total variable cost per unit of output. …” |
