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Production and cost — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost4 Marks
Question
What is the behaviour of:
  1. Average Fixed Cost.
  2. Average Variable Cost as more and more units of a good are produced?
✓

Answer

$\text{Average Fixed Cost}=\frac{\text{Total Fixed Cost}}{\text{Units of goods produced}}$TFC is always constant. Therefore, when units of goods produced increases, Average fixed cost always falls.
$\text{Average Variable Cost}=\frac{\text{Total Variable Cost}}{\text{Units of goods produced}}$
TVC first increases at decreasing rate and gradually increases at an increasing rate. Therefore, average variable cost first decreases, reaches its minimum and after reaching its minimum starts rising as more and more units of goods are produced.

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