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Home Questions WKTBJH59PR
Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Production and Costs

Question:

Study the table below and answer the question.

Output TFC     TVC     TC    
0 20 0 20
1 20 10 30
2 20 18 38
3 20 24 44
4 20 29 49
5 20 33 53
6 20 39 59

Assertion: Total fixed cost, however, is independent of the amount of output produced and remains constant for all levels of production in the short run.

Reasoning: The shape of TFC curve is a horizontal straight line where we place costs on the x-axis and output on the y-axis. 

Options:

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is not true but Reasoning (R) is correct.

Correct Answer:

Assertion (A) is true but Reasoning (R) is not correct.

Explanation:

The correct answer is option 3:  Assertion (A) is true but Reasoning (R) is not correct.

✔ Assertion (A) is correct:

  • Total Fixed Cost (TFC) refers to costs that do not change with the level of output in the short run.
  • These costs remain constant regardless of whether the firm produces zero output or maximum output.
  • Examples include rent, salaries of permanent employees, and depreciation of machinery.
  • Therefore, the assertion correctly states that TFC is independent of the amount of output produced and remains constant in the short run.

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