A firm’s total fixed cost is Rs 40. Its total cost (TC) schedule is given below:
| Output (units) | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| TC (Rs) | 60 | 75 | 85 | 100 |
Three of the following values are correct for this firm. Which one is the odd one out?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → SAC at 4 units = Rs 15
Given:
TFC = Rs 40
TC = Rs 60, 75, 85, 100 for 1 to 4 units
Work out each value from its definition.
Option (1) SMC of the 3rd unit = Rs 10 — Correct value. SMC = 85 − 75 = Rs 10.
Option (2) AFC at 2 units = Rs 20 — Correct value. AFC = TFC / q = 40 / 2 = Rs 20.
Option (3) SAC at 4 units = Rs 15 — Wrong value (odd one out). SAC = TC / q = 100 / 4 = Rs 25. Rs 15 is the SMC of the 4th unit (100 − 85).
Option (4) AVC at 2 units = Rs 17.50 — Correct value. TVC = 75 − 40 = 35, so AVC = 35 / 2 = Rs 17.50.
NCERT (2026-27): “3.7.1 Short Run Costs … The short run average cost (SAC) incurred by the firm is defined as the total cost per unit of output. We calculate it as SAC = TC/q (3.7) In Table 3.3, we get the SAC-column by dividing the values of the fourth column by the corresponding values of the first column. At zero output, SAC is undefined. For the first unit, SAC is Rs 30; for 2 units of output, SAC is Rs 19 and so on.” “3.7.1 Short Run Costs … In Table 3.3, we get the AFC-column by dividing the values of the second column by the corresponding values of the first column. Similarly, we get the AVC-column by dividing the values of the third column by the corresponding values of the first column. At zero level of output, both AFC and AVC are undefined. For the first unit of output, AFC is Rs 20 and AVC is Rs 10. Adding them, we get the SAC equal to Rs 30.” “3.7.1 Short Run Costs … The last column in table 3.3 gives a numerical example for the calculation of SMC. Values in this column are obtained by dividing the change in TC by the change in output, at each level of output.” |