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The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true?
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The marginal cost of a form of product and 90 unit of output is two is...
The Relationship between Marginal Cost and Average Cost
The marginal cost (MC) and average cost (AC) are two important concepts in economics that help businesses determine their production costs and make pricing decisions. Understanding the relationship between these two costs is crucial for businesses to optimize their production and pricing strategies.
Definition of Marginal Cost
The marginal cost is the cost of producing one additional unit of output. It measures the change in total cost when the quantity of output changes by one unit.
Definition of Average Cost
The average cost is the cost per unit of output. It is calculated by dividing the total cost by the quantity of output.
The Relationship between Marginal Cost and Average Cost
The relationship between marginal cost and average cost can provide insights into a firm's cost structure and efficiency. There are three possible scenarios:
1. MC < ac:="" in="" this="" scenario,="" the="" marginal="" cost="" is="" less="" than="" the="" average="" cost.="" this="" indicates="" that="" each="" additional="" unit="" of="" output="" is="" being="" produced="" at="" a="" cost="" lower="" than="" the="" average="" cost.="" it="" implies="" that="" the="" average="" cost="" will="" decrease="" as="" more="" units="" are="" produced.="" this="" situation="" is="" beneficial="" for="" the="" firm="" as="" it="" is="" operating="" efficiently="" and="" experiencing="" economies="" of="" />
2. MC = AC: When the marginal cost is equal to the average cost, it means that the cost of producing each additional unit is the same as the average cost. This indicates that the firm is operating at its optimal level of production efficiency. The average cost remains constant as more units are produced.
3. MC > AC: If the marginal cost exceeds the average cost, it suggests that the cost of producing each additional unit is higher than the average cost. This implies that the average cost will increase as more units are produced. This situation indicates inefficiency and could be due to diseconomies of scale or other factors increasing production costs.
Analysis of the Given Information
In the given scenario, the marginal cost of producing 90 units of output is Rs.20, and the average cost at the same level of output is Rs.15. Based on this information, we can determine the relationship between MC and AC.
Since the marginal cost is higher than the average cost (MC > AC), it suggests that each additional unit of output is being produced at a higher cost than the average. This indicates inefficiency and a potential increase in average cost as more units are produced.
Conclusion
Based on the given information, it can be concluded that the marginal cost is greater than the average cost. This implies that the firm is operating inefficiently and may experience an increase in average cost as production increases.
The marginal cost (MC) and average cost (AC) are two important concepts in economics that help businesses determine their production costs and make pricing decisions. Understanding the relationship between these two costs is crucial for businesses to optimize their production and pricing strategies.
Definition of Marginal Cost
The marginal cost is the cost of producing one additional unit of output. It measures the change in total cost when the quantity of output changes by one unit.
Definition of Average Cost
The average cost is the cost per unit of output. It is calculated by dividing the total cost by the quantity of output.
The Relationship between Marginal Cost and Average Cost
The relationship between marginal cost and average cost can provide insights into a firm's cost structure and efficiency. There are three possible scenarios:
1. MC < ac:="" in="" this="" scenario,="" the="" marginal="" cost="" is="" less="" than="" the="" average="" cost.="" this="" indicates="" that="" each="" additional="" unit="" of="" output="" is="" being="" produced="" at="" a="" cost="" lower="" than="" the="" average="" cost.="" it="" implies="" that="" the="" average="" cost="" will="" decrease="" as="" more="" units="" are="" produced.="" this="" situation="" is="" beneficial="" for="" the="" firm="" as="" it="" is="" operating="" efficiently="" and="" experiencing="" economies="" of="" />
2. MC = AC: When the marginal cost is equal to the average cost, it means that the cost of producing each additional unit is the same as the average cost. This indicates that the firm is operating at its optimal level of production efficiency. The average cost remains constant as more units are produced.
3. MC > AC: If the marginal cost exceeds the average cost, it suggests that the cost of producing each additional unit is higher than the average cost. This implies that the average cost will increase as more units are produced. This situation indicates inefficiency and could be due to diseconomies of scale or other factors increasing production costs.
Analysis of the Given Information
In the given scenario, the marginal cost of producing 90 units of output is Rs.20, and the average cost at the same level of output is Rs.15. Based on this information, we can determine the relationship between MC and AC.
Since the marginal cost is higher than the average cost (MC > AC), it suggests that each additional unit of output is being produced at a higher cost than the average. This indicates inefficiency and a potential increase in average cost as more units are produced.
Conclusion
Based on the given information, it can be concluded that the marginal cost is greater than the average cost. This implies that the firm is operating inefficiently and may experience an increase in average cost as production increases.
Community Answer
The marginal cost of a form of product and 90 unit of output is two is...
Marginal cost and average cost for both rising
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The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true?
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The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true?.
The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The marginal cost of a form of product and 90 unit of output is two is 20. Average cost at the same level of output is Rs.15 which of the following must be true?.
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