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A firm producing 7 unit of output has an average total cost of rupees 150 and has to pay rupees 350 to its fixed factor of production whether it produces or not how much of the average total cost is made up of variable cost?
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A firm producing 7 unit of output has an average total cost of rupees ...
Understanding Average Total Cost (ATC)
To calculate how much of the Average Total Cost (ATC) is made up of variable costs, we need to break down the components of ATC.
Key Components of ATC
- Average Total Cost (ATC): It is calculated as the total cost divided by the number of units produced.
- Fixed Cost (FC): This is the cost that does not change with the level of output. In this case, the firm pays rupees 350.
- Variable Cost (VC): This cost varies with the level of output and can be calculated once we understand the total cost.
Calculating Total Cost (TC)
- Given that the average total cost for producing 7 units is 150, we can calculate the Total Cost (TC) as:
TC = ATC * Quantity
TC = 150 * 7 = 1050
Identifying Fixed and Variable Costs
- We know the Fixed Cost (FC) is rupees 350.
- Now, we can find the Variable Cost (VC) using the formula:
TC = FC + VC
1050 = 350 + VC
- Rearranging this gives:
VC = 1050 - 350 = 700
Calculating Average Variable Cost (AVC)
- Finally, to find the Average Variable Cost (AVC), we divide the variable cost by the number of units produced:
AVC = VC / Quantity
AVC = 700 / 7 = 100
Conclusion
- Therefore, the Average Variable Cost (AVC) per unit is rupees 100, indicating that out of the total average cost of rupees 150, rupees 100 is attributable to variable costs.
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A firm producing 7 unit of output has an average total cost of rupees 150 and has to pay rupees 350 to its fixed factor of production whether it produces or not how much of the average total cost is made up of variable cost?
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A firm producing 7 unit of output has an average total cost of rupees 150 and has to pay rupees 350 to its fixed factor of production whether it produces or not how much of the average total cost is made up of variable cost? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about A firm producing 7 unit of output has an average total cost of rupees 150 and has to pay rupees 350 to its fixed factor of production whether it produces or not how much of the average total cost is made up of variable cost? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm producing 7 unit of output has an average total cost of rupees 150 and has to pay rupees 350 to its fixed factor of production whether it produces or not how much of the average total cost is made up of variable cost?.
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