Answer to Question #200554 in Macroeconomics for Mradul prakash agn

Question

Q.19 The average cost of producing 10 units is Rs 30, while the average cost of producing 20 units is Rs 20. Find the average cost of producing 30 units.

{Hint : Find Fixed cost. TC of 10 units = Rs 300, TC of 20 units = Rs 400, VC = Rs 10/ unit

Fixed cost = TC = FC + VC (10* 10) = 300 = FC + 100 = FC = 200. Thus, AC of producing 30 units will be Rs 16.67}

Answer 1

Given :

Average cost of producing 10 units = Rs 30

Average cost of producing 20 units = Rs 20.

Average cost $= \frac{Total\space cost } {Quantity}$

Total cost $= Average \space cost × Quantity$

Total cost at 10 units$= 30 × 10 = 300$

Total cost at 20 units $= 20 × 20 = 400$

Variable cost is that cost which changes with output.

Therefore variable cost = 10 per unit

$TC = TFC + TVC$

$TC = TFC + VC (Q)$

TC (at 10 units) = $TFC + 10(10) = 300$

$TFC = 200$

TC of producing 30 units $= TFC + TVC = 200 + 10(30) = 200 + 300 = 500$

AC of producing 30 units$= \frac{500}{30}$

$= 16.66$