Question

A firm 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 costs?

• A. Rs$200$
• B. Rs$50$
• C. Rs$300$
• D. Rs$100$

Answer 1

The correct option is D Rs$100$

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