Question

From the following data on the cost of production of a firm calculate

(i) average fixed cost,

(ii) average variable cost, and

(iii) the marginal cost, of producing the 4th Unit.

Output(kg)	0	1	2	3	4
Total Cost (Rs.)	$80$	$102$	$122$	$140$	$156$

Answer 1

(i) AFC (of fourth unit)$=Rs.20$;

Note: This is because, $TC=TFC+TVC$ and thus in 1st Unit, $80\left(TC\right)=80\left(TFC\right)+0\left(TVC\right)$.

(ii) AVC (of fourth unit)$=Rs.19$;

Note: This is because, $AVC=$ $\frac{\text{TC}}{\text{Q}}$ and thus in 4th Unit, $19\left(AVC\right)=$ $\frac{\text{156(TC)}}{\text{4(Q)}}$

(iii) Marginal cost (of fourth unit)$=Rs.16$

Note: This is because, $MC={TC}_{(}n+1)-{TC}_n$ and thus in 4th Unit, $16\left(MC\right)=156({TC}_{(}n+1))-140({TC}_n)$