ECONOMICS

BOOKS - SANDEEP GARG ECONOMICS

(HINGLISH)

COST

Example

1. Calculate Total Fixed Coast (TFC) and Total

Variable Cost (TVC).

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2. The total cost curve make an intercept of

₹50cm on the Y-axis. Calculate total fixed cost

and total variable cost.

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3. The details about total variable cost (TVC) of

a firm is given. It is also given that the vertical

distance between TVC curve and total cost

(TC) curve is fixed at ₹60 at all levels of output.

On the basis of this data, calculate TC.

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4. Find out the missing figure from the given

below :
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5. Calculate total variable cost and marginal

cost at each given level of output from the

following table :

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6. Calculate TFC, TVC, ATC, AFC, AVC and MC :

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7. From the following data, detemine the

values of TFC, TVC, AC, AVC and AFC :

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8. Following information is given about a firm :

From this information find out :

(i) Average fixed cost of producing 4 units,

(ii) Average variable cost of producing 5 units,

(iii) Least average cost level of output,

(iv) Marginal cost of producing the 3 unit,

rd

(v) Total variable cost of producing 6 unit.

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9. A firm's fixed cost is ₹2, 000. Compute TVC,

AVC, TC and ATC from the following table :

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10. Given below is the cost schedule of a firm.

Its average fixed cost is ₹20 when it produces

3 units.
Calculate its marginal cost and average total

cost at given level of output .

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11. Determine AC and MC.

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12. Find AVC and MC at each given level of

output.
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13. From the following table, calculate average

variable cost of each given level of output:

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14. The fixed costs of a firm are ₹60 . Its

marginal cost at different levels of output is

given below. Calculate ATC and AVC.

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15. Given the total fixed cost is ₹60, complete

the following table,

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16. Calculate the values of AC and MC.

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17. Calculate AC and MC for each level of

output.

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18. Calculate 'total vaiable cost' and 'total cost'

from the following cost schedule of a firm

whose fixed cost are ₹10.

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19. The total fixed cost of a firm is ₹12. Given

below is its marginal cost schedule.

Calculate total cost and average variable cost

for each given level of output.

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20. A firm's Average Fixed Cost of producing 2

units of a good is ₹9 and given below is its

total cost schedule. Calculate its Average

Variable Cost and Marginal Cost for each of

the given level of output :

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21. Complete the following table :

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22. Find out the missing figure from the table

given below :

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23. Complete the following table :

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24. Suppose that a firm's total fixed cost is

₹100, and the marginal cost schedule of a firm

the following :
(a) Is the MC cirve U-shaped ?

(b) Derive the AVC schedule . Will the AVC

curve be U-shaped ? Discuss why or why not.

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25. Calculate the weekly TC and AVC from the

following particlars:
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26. A firm is producing 20 units. At this level of

output, ATC and AVC are respectively equal to

₹40 and ₹37. Find out the total fixed cost of

the firm.

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27. TC rises from ₹30 to ₹55 when the output

increases from 5 units to 6 units. Find out the

MC of 6 unit.
th

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28. The total cost of producing 9 units of

output is ₹85. If average total cost of

producing 10 units is ₹10, then what will be

the marginal cost of producing this level of

output ?
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29. The AC of 5 units is ₹6 and AC of

producing 6 units is ₹5. Calculate the MC of

6
th
unit.

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30. When output increases from 40 units to 55

units, TC increases from ₹2, 500 to ₹3, 250.

Calculate MC.

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 31. The total cost of a firm increased by ₹450,

when production increased from 12 units of 15

units, Calculate marginal cost of the firm.

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Hots Higher Order Thingking

1. "The gap between AC and AVC keeps on

decreasing with rise in output, but they never

meet each other". Comment.

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2. Why does the minimum point of AV curve

fall towards right of AVC curve ?

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3. "MC can be calculated both from total cost

and total variable cost and is not affected by

total fixed cost". Discuss

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4. Calculated TFC, it AC and AVC are ₹22 and

₹18 respectively, at output of 10 units.

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5. Classify the following as fixed cost and

variable cost :

(i) Salary to manager of the company.

(ii) Wages to casual labour.

(iii) Payment of insurance premium for

insurance of factory.

(iv) Payment for raw material.

(v) Payment of rent of Postpaid connection of

Mobile Phone.

(vi) Interest on lone taken from ICICl.

(vii) Electicity charges beyond the minimum

rent.

(viii) Payment of rent of the factory builing to

the landlord.

(ix) Commission to production manager on

the basis of number of units produced.

(x) Payment of fuel used in machines.

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6. Answer the following question:

(i) Why does AFC curve never touch the X-axis

(ii) Why does TVC curve start from origin?

(iii) Why AC, AVC and MC curves are U-shaped ?

(iv) Why are the gap between TC curve and

TVC curve remains constant with rise in

output ?

(v) Why does AC curve lie above the AVC curve

?
(vi) Why does TC curve and TFC curve start

from the same point above the origin?

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7. The two inversely S-shaped short run cost

curve are parallel to each other and maintain a

constant distance of ₹50. What cost is

indicated by ₹50 ? Also , Identify the two

inversely S-shaped short run cost curves.

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8. On the basis of given diagram, answer the

following question:

(i) Identify the three short-run cost curves.

(ii) Why all the three curves are U-shaped ?

(iii) Why does the distance between curve A

and curve B fall with rise in output ? Will they

coincide at any level of output?

(iv) Why does the minimum point of curve A lie

to the right of minimum point of curve B.

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9. Identify cost and explicity cost in each of the

individual cases.

(i) An individual is both the owner and the

manager of a shop taken on rent.

(ii) A producer borrows money and opens a

shop. The shop premise is owned by him.

(iii) A producer invests his own savings in

starting a business and employs a manager to

look after it.

(iv) A farmer takes a farm on rent and carries

on farming with the help of family members.

(v) A producer borrows money and starts a

business. He himself looks after the business.

(vi) A woman borrows money from a bank and

starts a business in a building owned by her.

She manages the business herself.

(vii) A charatered accountant starts

accounting services in the office owned by him

and by investing his own savings. He employs

assistance for this purpose.

(viii) A person starts a taxi service. The taxi is

financed by a bank. He himself drives the taxi.

He also pays annual license fees to goverment.

(ix) A person starts a goods transport

business. He purchases a goods carrier using

partly this own savings and partly borrows

money. He drives the carrier himself.

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10. Find out(a) explicit cost and (b) implicit

from the following:

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11. Dr. Vivek Aggarwal is running a dental clinic

at his home. He his invested ₹2, 00, 000 as

capital and has also borrowed ₹1, 00, 000

from Axis Bank at an interest rate of 9% p.a.

He has also hired an assistant a monthly salary

of ₹12, 000. The estimated monthly rental of

his clinic is ₹25, 000. Calculate the annual

implicit and explicity cost if imputed annual

value of services of Dr. Vivek Aggarwal is

₹4, 00, 000.

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True And False

1. Average variable cost can fall even when

marginal cost is rising.

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2. The difference between total cost and total

variable cost falls with increase in output.

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3. Average cost can rise even when marginal

cost is falling.

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4. If a machinary has no possible alternative

use, its opportunity cost will be very high.

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5. Average variable cost falls when it is more

than marginal cost.

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6. The minimum point of average cost curve

lies of the right of average variable cost curve.

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7. Average cost and average variable cost curve

coincides when average fixed cost is zero.

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8. Total fixed remains same even if output is

zero.

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9. Total fixed cost is more than total variable

cost at zero level of output.

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10. Total fixed cost curve is a vertical straight

line, parallel to Y-axis.

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11. Total cost can be obtained as summation of

marginal costs.

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12. Total cost of production is the sum total of

variable cost and marginal cost.

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13. If 10 unit cost ₹36 to produce and 12 units

cost ₹50, then marginal cost is equal to ₹14.

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14. Average variable cost curve is a U-shaped

curve.

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15. Marginal cost is not affected by total fixed

cost.

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16. AFC curve is a rectangular hyperbola curve.

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17. Both total cost and total fixed cost curve

start from the same point.

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18. Marginal cost changes at a rate faster than

average cost.

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19. When we consider costs in economics, we

include explicit cost only.

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20. Average cost falls only when marginal cost

falls.

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21. Total cost can never be constant.

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22. Costs that have been already incurred are

important factors in making production

decisions.

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23. As output is increased, the difference

between average total cost and average fixed

cost, which never becomes zero as total fixed

cost is never zero.

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24. The marginal cost curve can intersect the

average cost curve ony at its minimum point.

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25. The difference between average total cost

and average variable cost is average fixed cost,

which never becomes zero as total cost

decreases with decrease with decrease in the

level of output.

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26. Explicit cost includes opportunity cost of

resources owned and used by the firm's

owners.

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27. When marginal cost rises, average cost also

rises.

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28. MC is minimum at point where TC start

increasing at an increasing rate.

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29. As soon as marginal cost starts rising,

average variable cost also starts rising.

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30. Average cost must exceed marginal cost at

the point when average cost is minimum.

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31. Insurance permium on factory building

paid to Oriental insurance is a fixed cost.

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32. Average fixed cost curve touches the Y-axis

because at zero output, average fixed cost is

zero.

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33. The MC curve may be rising or failing just

before it becomes equal to AVC and ATC

curves.

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34. All per unit cost curves (i.e., AVC and AFC

curves) are U-shaped.

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35. With increase in level to output, average

fixed cost goes on failling till reaches zero.

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36. Total cost rises only when marginal cost

rises.

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37. Average cost will rise only when marginal

cost rises.

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38. The difference between average cost and

average variable cost is always constant .

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 39. As output increase the difference between

average cost and average variable cost

decreases.

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Guidelines

1. Briefly explain the concept of the cost

function.

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2. What are the total fixed cost, total variable

cost and total cost of a firm ? How are they

related ?

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3. What are the average fixed cost, average

variable cost and average cost of a firm ? How

are they related ?

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4. Can there be some fixed cost curve in the

long run ? If not, why ?

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5. What does the averge fixed cost curve look

like ? Why does it look so ?

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6. What do the short run marginal cost (SMC),

average variable cost and short run average

cost (SAC) curves look like ?

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7. Why does the SMC curve cut the AVC, curve

at the minimum point of the AVC curve ?

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8. At why point does the SMC curve cut the

SAC curve ? Give reason in support of your

answer.

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9. Why is the short run marginal cost curve 'U'-

shaped?

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10. The following table shows the total

sechedule of a firm. What is the total fixed cost

schedule of the firm? Calculate the TVC, AFC,

AVC, SAC (Short-run Average Cost or AC) and

SMC (Short-run Marginal Cost or MC)

schedules of the firm.

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11. The following table gives the total cost

schedule of firm. It is also given that the

average fixed cost at 4 units of output is ₹5.

Find the TVC, TFC, AVC, AFC, SAC and SMC

schedules of the firm for the corresponding

values of output.

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 12. A firm's SMC schedule is shown in the

following table. The total fixed cost of the firm

is ₹100. Find the TVC, TC, AVC and SAC

schedules of the firm.

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Multiple Choice Qns

1. Identify the two cost curves which start from

the same point on the Y-axis :

A. TVC and TFC

B. TFC and AVC

C. TFC and TC

D. TFC and AFC

Answer: C

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2. "Salary of Permanent staff" is which type of

cost ?

A. Variable and implicit Cost

B. Fixed and implicit Cost

C. Fixed and Explicit Cost

D. Variable and Explicit Cost

Answer: C

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3. The cost curve, which is inversely S-shaped

is:

A. Average Cost Curve

B. Total Fixed Cost Curve

C. Total Variable Cost Curve

D. Marginal Cost Curve

Answer: C

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4. Which cure is not affected by fixed cost ?

A. MC Curve

B. TC Curve

C. AC Curve

D. AFC Curve

Answer: A

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5. The cost schedule of a firm is given as :

In the given case, average variable cost at rd

3

level of output will be :

A. 70

B. 66

C. 65

D. 64

Answer: D
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6. Marginal cost refers to addition to the total

cost when one more unit of output is ______,

A. Wasted

B. Produced

C. Employed

D. Sold

Answer: B

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7. MC can be direct derived from :

A. TFC

B. TVC

C. AC

D. AFC

Answer: B

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8. Average fixed costs:

A. Remain same at all levels of output

B. Increase as output increases

C. Decreases as output increases

D. Initially increases and then decreases

Answer: C

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9. All the curves except______ are U shaped

curves :

A. Average Fixed Cost Curve

B. Average Variable Cost Curve

C. Average Cost Curve

D. Marginal Cost Curve

Answer: A

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10. Cost schedule is given as :

In the given case, marginal cost at 4th level of

output will be :

A. 10

B. 5

C. 45

D. 20

Answer: A

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11. Area under MC Curve is equal to :

A. TVC

B. AFC

C. AVC

D. AC

Answer: A

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12. Which formula is incorrect to determine

the value of TC :

A. T C = TV C + TFC

B. T C = ∑ MC

C. T C = AC × Output

D. T C = ∑ MC + T F C

Answer: B

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13. The cost schedule of a firm, whose total

fixed cost is ₹12, is given as :

In the given case, total cost at nd

2 level of

output will be :

A. 16

B. 28

C. 9

D. 7
Answer: B

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14. Normal profits earned by a firm are

included will be :

A. Implicit cost

B. Explicit cost

C. Fixed cost

D. Variable cost
Answer: A

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15. The shape of total fixed cost curve is :

A. U-shaped

B. Downward sloping

C. Inversely S-Shaped

D. Horizontal straight line parallel to x-axis

Answer: D
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16. Cost function is a ____ concept:

A. Economical

B. Functional

C. Financial

D. Technical

Answer: B

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17. Nishant, Tavieen and Manas are confused

with the formula for deriving TC:

• Nishant says: T C = TV C + TFC

• Tavleen says: T C = AC × Output

• Manas says: T C = ∑ MC + T F C

Identify who amongst them is correct.

A. Nishant

B. Manas

C. Tavleen

D. All of them
Answer: D

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18. TFC is ₹20 at 2

nd
unit of output and MC at

3
rd
unit is ₹5. TFC at 3 unit of output will be :
rd

A. ₹15

B. ₹20

C. ₹25

D. ₹5
Answer: B

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19. Which diagram correctly depicts total

variable cost curve :

A.

B.
 C.

D.

Answer: D

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20. The curve in the following diagram is the

most similar to a typical ,

 A. Total Variable Cost Curve

B. Marginal Cost Curve

C. Total Cost Curve

D. Average Variable Cost Curve

Answer: C
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21. MC curve intersects AC curve at its ______

point and AVC curve at its _____ point.

A. Maximum, Minimum

B. Minimum, Minimum

C. Minimum, Maximum

D. None of these

Answer: B

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22. AC, AVC and MC curves are 'U' shaped

because of :

A. Law of Diminishing Marginal Utility

B. Law of Diminishing Returns

C. Law of Variable Proportions

D. None of these

Answer: C

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23. Which two curves are intersected by MC

curve at their minimum points:

A. AC and AVC

B. AVC and AFC

C. AC and AFC

D. AC and TVC

Answer: A

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24. Minimum point of MC curve comes before

the minimum point of :

A. AC Curve

B. AVC Curve

C. Both (a) and (b)

D. Neither (a) nor (b)

Answer: C

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25. AVC can fall even when MC is rising,

provided :

A. M C < AV C

B. M C > AV C

C. M C = AV C

D. None of these

Answer: A

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26. Which condition is incorrect :

A. AC can rise when MC is falling

B. AC can fall when MC is rising

C. AVC can fall when MC is rising

D. AC can rise when MC is rising

Answer: A

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27. Ishaan, Piyush and Bhavya are three friends

talking about the relationship between

marginal cost (MC) and average cost (AC).

• Ishaan says, "Mc curve intersects AC curve

from abvoe".

• Bhavya says, "MC curve does not intersect AC

curve at all".

• Piyush says, "MC curve intersects AC curve

from below".

Out of the three , Who is correct ?

A. Piyush
 B. Ishaan

C. Bhavya

D. All of them

Answer: A

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28. Which one of the following is also known

as fixed cost ?

A. Supplementary Cost
 B. Primary Cost

C. Direct Cost

D. Avoidable Cost

Answer: A

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29. The cost which is never zero even when

production is stopped is known as :

A. Supplementry Cost
 B. Primary Cost

C. Explicit cost

D. Avoidable Cost

Answer: A

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30. AC is obtained by dividing TC by the level

of :

A. Labour employed
 B. Output produced

C. Units consumed

D. Output sold

Answer: B

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31. when change in total cost is divided by

change in output, we get :

A. Average cost
 B. Total variable cost

C. Marginal cost

D. Average variable cost

Answer: C

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32. Which of the following cost curves is

rectangular hyperbola ?

A. Average cost curve

 B. Marginal cost curve

C. Average variable cost curve

D. Average fixed cost curve

Answer: D

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33. When AC is rising MC is :

A. Equal to AC

B. More than AC
 C. Less than AC

D. Constant

Answer: B

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34. Minimum point of AC occurs to the right of

minimum point of :

A. TC

B. TVC
 C. AFC

D. AVC

Answer: D

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35. MC curve is common to both :

A. AFC and TFC

B. AC and AVC

C. AVC and AFC

 D. AC and AFC

Answer: B

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36. In the short run, total cost curve starts

from:

A. Origin

B. Positive vertical intercept

C. Positive horizontal intercept

 D. None of these

Answer: B

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37. Identify the correct mathematical

expression.

A. T C = TFC − TV C

B. T V C = TFC − TC

C. T F C = TC − TV C
 D. T C = TV C − TFC

Answer: C

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38. AFC curve :

A. Touches the X-axis

B. Touches the Y-axis

C. Touches both X -axis and Y-axis

D. Does not touch either of the axes

Answer: D

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39. As output arises:

A. AVC curve and AC curve move away from

each other

B. AVC curve and AC curve come closer and

closer to each other

 C. AVC curve and AC curve meet afte

sometime

D. AVC curve and AC curve come closer and

closer to each other, but do not meet

Answer: D

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40. A firm producing 6 units of output has

average total cost ₹150 and has to pay ₹240

to its fixed factors of production. In the given

case, average variable cost at 6 units of output

will be :

A. ₹150

B. ₹900

C. ₹110

D. ₹1, 440

Answer: C

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41. Which cost increases continuously with

increase in production ?

A. Average cost

B. Marginal cost

C. Variable cost

D. Fixed cost

Answer: C

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42. Which of the following is true with respect

to relationship between AC and MC?

A. When M C > AC , AC falls

B. AC curve intesects MC curve at minimum

MC

C. MC curve intersects AC curve at

minimum AC

D. When MC lt AC, ATC` rises

Answer: C

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43. A firm is has variable cost ₹1, 000 at five

units of output. If fixed costs are ₹400, what

will be the average total cost at five units of

output ?

A. ₹280

B. ₹80

C. ₹200

D. ₹1400

Answer: A
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44. Which is the following is a variable cost for

a firm ?

A. Intersect on loan

B. Monthly rent

C. Insurance premium

D. Wages to employes

Answer: D
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45. A firm's average fixed cost (AFC) is ₹20 at

six units of output. What will be AFC at four

units of output ?

A. ₹20

B. ₹30

C. ₹40

D. ₹50

Answer: B
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46. Which of the following statement is true ?

A. AT C = AF C − AV C

B. AV C = AF C + AT C

C. AF C = AT C + AV C

D. AF C = AT C − AV C

Answer: D

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47. _____ cost refers to actual payment made

by the entreneur to the providers of factor

services.

A. Explicit

B. Implicit

C. Variable

D. Fixed

Answer: A

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48. The distinction drawan between fixed and

variable costs is based on :

A. Whether the costs or cannot be changed

during the life of the plant

B. Whether the costs do or do not vary

with the output produced in the long

run

C. Whether the costs do not enter the

calculation of total costs

 D. Whether the costs do or do not vary

with the output produced in the short

run

Answer: D

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49. Which of the following is an example of

"Implicit cost" ?
 A. Interest that could have been earned on

retained earnings used by the firm to

finance expansion

B. Payment of Rent by the Firm

C. Interest Payment made by the firm for

funds borrowed from a Bank

D. Payment of Wages by the Firm

Answer: A

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50. If a resource can be put only to particular

use, then opportunity cost is :

A. Applicable and quantifiable

B. Applicable but not quantifiable

C. Not applicable at all

D. None of these

Answer: C

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51. If a Firm produces zero output in the short

period, then :

A. Total Cost will be zero

B. Variable Cost will be positive

C. Fixed Cost will be positive

D. Marginal Cost will be positive

Answer: C

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52. With which of the following, the concept of

marginal cost is closely related ?

A. Variable Cost

B. Fixed Cost

C. Opportunity Cost

D. Implicit cost

Answer: A

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53. Initially, even when there is an increase in

AVC, AC may still decline because :

A. Fall in AF C < Rise inAV C

B. Fall in AF C > Rise in AVC

C. Fall in AF C = Rise in AVC

D. None of these

Answer: B

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54. MC Curve cuts the AVC and ATC Curves :

A. From Above

B. From below

C. Either (a) and (b)

D. Neither (a) nor (b)

Answer: B

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55. The total cost at 5 units of output is ₹30.

The fixed cost is ₹5. The average variable cost

5 units of output is :

A. ₹25

B. ₹6

C. ₹5

D. ₹1

Answer: C

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56. The average fixed cost at 4 units of output

is ₹20. Average variable cost at 5 units of

output is ₹40. Average cost of producing 5

units is : (Choose the correct alternative)

A. ₹20

B. ₹40

C. ₹56

D. ₹60

Answer: C

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57. The realtionship between AC, AVC and MC

is rightly shown by :

A.

B.

C.
 D.

Answer: D

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58. Identify the following curve :

A. Average Variable Cost Curve

B. Total Variable Cost Curve

C. Average Fixed Cost Curve

 D. Average Cost Curve

Answer: C

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59. Which of the following diagram correctly

depicts the relationship between T C, T F C

and TVC ?

A.
 B.

C.

D.

Answer: C

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60. The area under the following curve is equal

to :

A. Total Cost

B. Average Cost

C. Average Variable Cost

D. Total Variable Cost

Answer: D

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61. Which of the following diagram correctly

depicts the ralation between AC and MC ?

A.

B.
 C.

D.

Answer: C

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62. When AC > MC , then MC can:

 A. Fall

B. Rise

C. Both (a) and (b)

D. None of these

Answer: C

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63. Out of the following costs, which cost can

never be zero :
 A. AFC

B. AVC

C. TVC

D. None of these

Answer: A

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64. If a firm's production department data says

that the TVC for producing 8 units and 10

units of output is ₹2, 500 and ₹3, 000

respectively, marginal cost of 10 unit will be :

th

A. ₹100

B. ₹150

C. ₹500

D. ₹250

Answer: D

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65. When average cost falls, marginal cost:

(Choose the correct alternative)

A. Falls

B. Rises

C. May fall or may rise

D. Neither falls nor rises

Answer: C

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Very Short Answer Type

1. Give the meaning of cost.

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2. What is meant by explicit cost ?

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3. What is the meaning of implicit cost ?

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4. Give the meaning of opportunity cost.

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5. What are the 2 broad divisions of short run

costs ?

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6. Define fixed costs.

OR

What is meant by supplementary costs ?

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7. Define variable coasts .

OR

What is the meaning of prime costs ?

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8. What is the meant by total cost ?

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9. Why are TC and TVC curves parallel each

other ?

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10. How does the total fixed cost change when

output changes ?
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11. How is average fixed cost curve shaped ?

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12. Why does average fixed cost curve shaped ?

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13. What is mean by average variable cost ?

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14. What is the shape of average variable cost

curve ?

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15. Give the meaning of marginal cost ?

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16. How is MC related to TFC ?

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17. How is TVC derived from MC schedule ?

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18. What does the area under the marginal

cost curve show ?

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19. When AC curve slopes downwards, what

will be the position of MC curve ?

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20. What happens to AC when MC is equal to

AC ?

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21. Can AC and AVC curves touch each other ?

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22. A producer spent a sum of ₹12, 000

towards the fixed inputs to produce 200 units

of commodity X. What will be the total fixed if

the producer wants to produe 300 units ?

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23. Why is average total cost greater than

average variable cost?

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24. What is the behaviour of Total Variable

Cost as output increase ?

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25. What is the behaviour of Total Variable

Cost as output increases ?

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26. Give two examples of fixed costs.

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27. Give two examples of variable costs.

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28. Give an example each of fixed cost and

variable cost.

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29. Give two example of implicit cost.

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30. What is the relation between marginal cost

and average variable cost when marginal cost

is rising and average variable cost in falling ?

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31. What is the relation between marginal cost

and average cost when average cost in

constant is constant ?

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32. What is the relation between marginal cost

and average cost when average cost is rising ?

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33. What is the relation between Average

Variable Cost and Average Total Cost, If Total

Fixed Cost is zero ?

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34. What happens to the difference between

Average Total Cost and Average Variable Cost

as production is increased ?

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35. What happens to the difference between

Total Cost and Total Variable Cost as output is

increased ?

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36. A producer borrows money to run a

business but manages the business himself.

Identify implicit cost.

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37. A farmer inverts his own saving in doing

farmings, but hires labour to do work. Identify

implicit cost.

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38. If it is given that the total variable cost for

producing 15 units of output is ₹3, 000 and

for 16 units is 3, 500. Find the value of

Marginal Cost.

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39. An owner withdraws ₹10, 000 from his

personal bank account and puchaes a

machinery for the business. Identify the

explicit cost and implicit cost.

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40. Why average cost falls upto a greater

output level as compared to average variable

cost ?

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41. At what level of production is total cost

equal to total fixed cost ?

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Short Answer

1. Giving examples, explain the meaning of cost

in economics.

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2. Explain, in brieef, the meaning of

opportunity cost.

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3. State the distinction between explicit cost

and implicit cost. Give an example of each.

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4. What is the meaning of fixed cost? Draw a

fixed cost curve with the help of an imaginary

schedule. Also, give two examples of fixd cost.

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5. Explain, in brief, the meaning of variable

cost with the help of a hypothetical schedule

and diagram.

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6. Distinguish between fixed costs and variable

costs. Give two examples of each.

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7. Define average variable cost (AFC) ? Discuss

the shape of AFC curve with the help of a

schedule and a diagram.

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8. What is meant by averge variable cost (AVC)

? Why is AVC curve U-shaped ?

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9. Explain the concept of marginal cost with

the help of a hypothetical schedule and

diagram.

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10. Why does the vertical distance between AC

curve and AVC curve gradually decline ?

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11. What is the relationship between marginal

cost and average variable cost ?

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12. Explain the relation between marginal cost

and average cost.

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13. Draw average total cost, average variable

cost and marginal cost curves in a single

diagram. Also, explain the relationship

between ATC and AVC.

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14. State the relation between total cost and

marginal cost.

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15. Discuss the relationship between TVC and

MC.

OR

Draw a diagram showing TVC in terms of the

area under MC curve.

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16. State the behaviour of Total Variable Cost.

Draw Total Variable Cost, Total Cast and Total

Fixed Cost Curves in a single diagram.

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17. Explain the behaviour of Average Fixed

Cost. Use diagram.

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18. What is the behaviour of average fixed cost

as output is increased ? Why is it so ?

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19. Define cost. State the relation between

marginal cost and average variable cost.

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20. What is the behaviour of (a) Average Fixed

Cost and (b) Average Variable Cost as more

and more units of a good are produced ?

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21. Explain the distinction between "change in

quantity supplied" and "change in supply". Use

diagram.

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22. Define cost. State the behaviour of : (a)

Total Fixed Cost and (b) Total Variable Cost as

output is increased ?

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 23. Justify the statement, 'in economics,

normal profits are always a part of total cost'.

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Long Answer Type

1. Explain, in brief, the various points of

difference between fixed cost and variable

cost.

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2. Explain the relationship between average

variable cost and marginal cost with the help

of a diagram.

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3. Draw Average Variable Cost (AVC), Average

Total Cost (ATC) and Marginal Cost (MC)curves

in a single diagram. State the relation between

MC curve and AVC & ATC curves.

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4. Explain the relationship between TC, TVC

and TFC with the help of a hypothetical

schedule and diagram.

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5. Why does the difference between Average

Total Cost and Average Variable Cost decrease

with an increase in the level of output.? Can

these two be equal at some level of output ?

Explain.
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6. State the relationship between : (a)

Marginal cost and average variable cost : (b)

Total cost and marginal cost.

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Unsolved Practicals
1. Calculate Total Fixed Cost (TFC) and Total

Variable Cost (TVC) .

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2. Find TFC and TVC .

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3. Determine TFC and TVC from the following

particulars :

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4. Estimate total cost, given that TFC at 0 level

of output is ₹60.

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5. Complete the following table:

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6. Given the fixed costs is ₹30, calculate : (a)

Marginal Cost and (b) Total Cost from the

following :

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7. The table given below shows the total cost

of a firm at different levels of output. Calculate

marginal cost and average variable cost at

each level of output.

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8. Calculate total variable cost and marginal

cost at each given level of output from the

following table:

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9. Calculate TFC, TVC, AFC, AVC and MC.

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10. Calculate TVC and AVC from the following

table :
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11. Calculate TFC, TVC, AVC, AFC, AC and MC.

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12. Given the fixed costs is ₹20, calculate : (a)

Total Variable Cost and (b) Total Cost from the

following

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13. Fixed costs of a firm are ₹30. Its total

variable cost at different levels of output is

given below. Calculate total cost and marginal

cost at each of output.

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14. Find MC from the following data :

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15. Calculate total cost and average variable

cost of a firm at each given level of the output

from its cost schedule given below :

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16. Calculate Marginal Cost and Average

Variable Cost from the following cost schedule

of a firm whose Total fixed Costs are ₹10 :

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17. A firm's fixed cost is ₹400. Compute TC, TVC,

AFC, and AC from the following table:

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18. Calculation Total Variable Cost and

Marginal Cost from the following cost

schedule of a firm whose Total Fixed Costs are

₹12 :
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19. Assuming that the total fixed cost is ₹24,

complete the following table :

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20. Determine AC and MC :

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21. A firm's average fixed cost, when it

produces 2 units, is ₹30. Its average total cost

schedule is given below. Calculate its marginal

cost and average variable cost at each level of

output.

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22. Suppose that TFC is ₹120, find out : (i) TC

and TVC, and (ii) MC from the following data:

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23. Find AC and TC from the following table :

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24. Find TC and MC, given TFC is ₹60.

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25. Find TC and AVC, given TFC is ₹120,

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26. Calculate AVC at each level of output.

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27. The information about the total cost for a

firm is given below :

From this information find out : (a) Average

fixed cost of producing 3 units, (b) Marginal

cost of producing th
4 unit, (c ) Output level
when marginal cost is greatest , (d) Total

variable cost of producing 5 units,

(e) Average variable cost of producing 3 units,

(f) Averge total of producing 4 units.

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28. Calculate Marginal Cost and Total Cost

from the following Cost Schedule of a firm

whose Total Fixed costs are ₹15 :

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29. Find out the missing figures from the table

given below :

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30. Find out the missing figure from the table

given below:
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31. Complete the following table :

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32. Find AVC and MC at each given level of

output.
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33. A firm is producing 20 units. At this level of

output, ATC and AVC are respectively equal to

₹40 and ₹37. Find out the total fixed cost of

the firm.

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34. Output increases from 3 units to 4 units.

As a result, TC rises from ₹19.60 to ₹24.50.

Find out MC.

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35. Calculate AC, AVC and the amount of profit

that the firm will earn, if it sells the entire

output at ₹60 per unit.

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36. Complete the following table :

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37. Complete the following table :

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38. Calculate marginal cost at each level of

output:

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39. Calculate marginal cost at each level of

output :

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40. Calculate average variable cost at each

level of output :

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41. Complete the following table:

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42. Complete the following table:

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