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Production and Costs
What does the average fixed cost curve look like? Why does it look so?...

What does the average fixed cost curve l | Class 12 Micro Economics Chapter Production and Costs, Production and Costs NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Micro Economics - Chapter Production and Costs. This page offers a step-by-step solution to the specific question from Exercise 1, Question 17: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 17:

What does the average fixed cost curve look like? Why does it look so?

Answer:

The short run marginal cost (SMC), average variable cost (AVC) and short run average cost (SAC) curves are all U-shaped curves. The reason behind the curves being U-shaped is the law of variable proportion. In the initial stages of production in the short run, due to increasing returns to labour, all the costs (average and marginal) fall. In addition to this in the short run MP of labour also increases, which implies that more output can be produced by per additional unit of labour, leading all the costs curves to fall. Subsequently with the advent of constant returns to labour, the cost curves become constant and reach their minimum point (representing the optimum combination of capital and labour). Beyond this optimum combination, additional units of labour increase the cost, and as MP of labour starts falling, the cost curve starts rising due to decreasing returns to labour.

Other Questions of Chapter Production and Costs

What are the total fixed cost, total variable cost and total cost of a firm? How are they related?

What do the short-run marginal cost, average variable cost and short-run average cost curves look like?

What are the average fixed cost, average variable cost and average cost of a firm? How are they related?

When does a production function satisfy increasing returns to scale?

Can there be some fixed cost in the long run? If not, why?

Find out the maximum possible output for a firm with zero units of L and 10 units of K when its production function is Q = 5L = 2K.

What is the law of variable proportions?

What are the average fixed cost, average variable cost and average cost of a firm? How are they related?

Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?

Let the production function of a firm be Q=2 L2 K2Q=2 L2 K2

Find out the maximum possible output that the firm can produce with 5 units of LL and 2 units of KK. What is the maximum possible output that the firm can produce with zero units of LL and 10 units of KK?

Popular questions of class 12 Micro Economics

The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.

A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?

How does the imposition of a unit tax affect the supply curve of a firm?

What is the supply curve of a firm in the long run?

Distinguish between a centrally planned economy and a market economy.

A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.

How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

What is budget line?

Suppose there are 20 consumers for a good and they have identical demand functions:

d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.

Recently Viewed Questions of Class 12 Micro Economics

What is the ‘price line’?

What does the price elasticity of supply mean? How do we measure it?

What is a production possibility frontier?

Distinguish between microeconomics and macroeconomics.

What do you understand by normative economic analysis?

What do you understand by positive economic analysis?

What do you mean by the production possibilities of an economy?

How does the budget line change if the price of good 2 decreases by a rupee
but the price of good 1 and the consumer’s income remain unchanged?

If a consumer has monotonic preferences, can she be indifferent between the
bundles (10, 8) and (8, 6)?

Suppose the price elasticity of demand for a good is – 0.2. How will the expenditure on the good be affected if there is a 10 % increase in the price of the good?

Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

Read the question carefully and focus on the core concept being asked.
Reference examples and data from the chapter when answering questions about Production and Costs.
Review previous year question papers to get an idea of how such questions may be framed in exams.
Practice answering questions within the time limit to improve your speed and accuracy.
Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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