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Byju's Answer

Standard XI

Economics

Efficient Scale of the Firm

If both avera...

Question

If both average cost (AC) and marginal cost (MC) are U shaped, then

AC will reach a minimum at a level of output that is less than that at which MC reaches a minimum.

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the total cost curve will be a straight line.

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AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum.

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both AC and MC will reach a minimum at the same level of output.

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Solution

The correct option is C AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum.

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Similar questions

Q. If total cost function is given by

C = a + b x + c x^{2}

, where x is the quantity of output show that

\frac{d}{d x} (A C) = \frac{1}{x} (M C - A C)

, where MC is the marginal cost and AC is the average cost.

Q. The average cost function,

A C

for a commodity is given by

A C = x + 5 + \frac{36}{x},

in terms of output

x

. Find :
(i). The total cost,

C

and marginal cost,

M C

as a function of

x

.
(ii). The outputs for which

A C

increases.

Q. Suppose that, at the profit-maximizing level of output, a firm finds that market price is less than average total cost, but greater than average variable cost. Which of the following statements is correct?

Total fixed costs of a firm are Rs. 100. Its average variable cost at different levels of output is given. Calculate total cost and marginal cost at each level of output.

$\begin{matrix} Output (units) & 1 & 2 & 3 & 4 Average Variable Cost (Rs) & 60 & 56 & 60 & 64 \end{matrix}$

Q. A manufacturer determines that his total cost function is

c = \frac{q^{3}}{3} + 2 q + 300

. Where

q

is the number of units produced.
(i) Find the marginal cost function.
(ii) Find the average cost function.
(iii) Find the level of output at which the averages cost is minimum.

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