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A firm has producing 7 units of output has an average total cost of Rs. 150 and has to pay Rs. 350 to its fixed factors of production whether it produces or not. How much of the average total cost is made up of variable cost?
  • a)
    200
  • b)
    50
  • c)
    300
  • d)
    100
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
A firm has producing 7 units of output has an average total cost of Rs...
Total cost = 7×150=1,0507×150=1,050
Total variable cost = 1,050−350=7001,050−350=700
Variable cost per unit = 700/7=100
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Most Upvoted Answer
A firm has producing 7 units of output has an average total cost of Rs...
Calculation of Variable Cost:

Given information:
Average total cost (ATC) = Rs. 150
Units of output = 7
Fixed cost (FC) = Rs. 350

Total Cost (TC) = ATC x Units of output
TC = 150 x 7 = Rs. 1050

Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC)
1050 = 350 + VC
Variable Cost (VC) = 700

Therefore, the variable cost per unit of output is:
Variable Cost (VC) = Total Variable Cost / Units of output
VC = 700 / 7 = Rs. 100

Hence, the option (d) 100 is the correct answer.
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A firm has producing 7 units of output has an average total cost of Rs. 150 and has to pay Rs. 350 to its fixed factors of production whether it produces or not. How much of the average total cost is made up of variable cost?a)200b)50c)300d)100Correct answer is option 'D'. Can you explain this answer?
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