CA Foundation Exam > CA Foundation Videos > Business Economics for CA Foundation > Average & Marginal Cost
Average & Marginal Cost Video Lecture | Business Economics for CA Foundation
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FAQs on Average & Marginal Cost Video Lecture - Business Economics for CA Foundation
| 1. What is the average cost in economics? |  |
Ans. Average cost in economics refers to the total cost of production divided by the quantity of output. It represents the cost per unit of production and is calculated by dividing the total cost by the total quantity produced.
| 2. How is average cost different from marginal cost? | |
Ans. Average cost and marginal cost are two different concepts in economics. Average cost is the total cost divided by the quantity of output, representing the cost per unit of production. On the other hand, marginal cost refers to the additional cost incurred by producing one additional unit of output. It represents the change in total cost when the quantity produced changes by one unit.
| 3. How can average cost be minimized? | |
Ans. Average cost can be minimized by achieving economies of scale. This means that as the quantity of production increases, the average cost decreases. This can be achieved through various means such as increasing the efficiency of production, reducing wastage, utilizing resources optimally, and adopting cost-saving measures. By optimizing production processes and achieving economies of scale, firms can minimize their average cost.
| 4. What are the factors that affect average cost? | |
Ans. Several factors can affect average cost in economics. These include the cost of inputs or resources, technology used in production, economies of scale, efficiency of production processes, government regulations, and market conditions. Changes in any of these factors can impact the average cost, either increasing or decreasing it.
| 5. How does average cost impact pricing decisions? | |
Ans. Average cost plays a crucial role in pricing decisions for businesses. Pricing decisions are often influenced by the average cost, as firms need to ensure that the price charged for their products covers the average cost of production. If the price is set below the average cost, the firm would incur losses. On the other hand, if the price is set above the average cost, the firm can generate profits. Therefore, understanding the average cost is essential for determining the optimal pricing strategy.
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Dec 20, 2024 Last updated |
Video Description: Average & Marginal Cost for CA Foundation 2024 is part of Business Economics for CA Foundation preparation.
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