Class 12 Micro Economics - Chapter Production and Costs NCERT Solutions | What are the average fixed cost, average
What are the average fixed cost, average variable cost and average cost of a firm? How are they related?
Average Fixed Cost: It is defined as the fixed cost per unit of output.
AFC=
Where, TFC = Total fixed cost
Q = Quantity of output produced
Average Variable Cost: It is defined as the variable cost per unit of output.
AVC=
Where, TVC = Total variable cost
Q = Quantity of output produced
Average Cost: It is defined as the total cost per unit of output. Average cost is derived by dividing total cost by quantity of output.
AC=
AC is also defined as the sum total of average fixed cost and average variable cost.
AC = AFC + AVC
Relationship between AC, AFC, AVC:
1) AVC and AFC are derived from AC as AC = AFC + AVC.
2) The plot for AFC is a rectangular hyperbola and falls continuously as the quantity of output increases.
3) The minimum point of AVC will always exist to the left of the minimum point of AC; i.e., point will always lie left to point M
4) AFC being a rectangular hyperbola falls throughout; this causes the difference between AC and AVC to keep decreasing at higher output levels. However, it should be noted that AVC and AC can never intersect each other. If they intersect at any point, it would imply that AC and AVC are equal at that point. However, this is not possible as AFC will never be zero because it is a rectangular hyperbola that never touches x-axis.
5) AC inherits shape from AVCs shape and it is because of law of variable proportions that both the curves are U-shaped.
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The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
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Popular Questions of Class 12 Micro Economics
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From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity
1
2
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Suppose the demand and supply curves of salt are given by:
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How does the equilibrium price and quantity change? Does the change conform to your expectation?
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Suppose the demand and supply curve of commodity XX in a perfectly competitive market are given by:
qD =700 - p
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= 0 or 0 ≤ p <15
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Considering the same demand curve as in exercise 22, now let us understand for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained?
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