Which of the following statement is inco

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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Production and Costs

Question:

Which of the following statement is incorrect in relation to cost function?

Options:

To produce any required level of output, the firm, in the short run, can adjust only variable inputs.

In order to increase the production of output, the firm must employ more of the variable inputs.

As output increases, total variable cost increases but there is no change in total cost.

None of the above

Correct Answer:

As output increases, total variable cost increases but there is no change in total cost.

Explanation:

The correct answer is Option 3: As output increases, total variable cost increases but there is no change in total cost.

1️⃣ Option 1 (Correct Statement):

In the short run, a firm can only adjust variable inputs (such as labor and raw materials), while fixed inputs (such as capital and land) remain unchanged.

2️⃣ Option 2 (Correct Statement):

To increase output, a firm must employ more variable inputs like labor and raw materials, since fixed inputs remain constant in the short run.

3️⃣ Option 3 (Incorrect Statement):

Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC).
As output increases, TVC increases, and since TC = TFC + TVC, TC must also increase.
The claim that "there is no change in total cost" is incorrect because total cost does increase as variable costs increase.