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Production and Costs
What are the average fixed cost, average variable cost and average cos...

What are the average fixed cost, average | 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 14: . 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 14:

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

Answer:

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.

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?

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?

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

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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