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Question
Answer the following question.
Mention any two examples of the implicit costs incurred by a firm.
Solution
The examples of the implicit cost incurred by a firm are given as follows:
- The imputed value of the services of the owner of the firm
- Imputed rent of the owner-occupied building.
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A producer borrows money to run a business but manages the business himself. Identify implicit cost.
A farmer invests his own saving in doing farmings but hires labour to do work. Identify implicit cost.
A producer starts the business in the building owned by him and borrows money for running it. Identify implicit cost.
When the total fixed cost of producing 100 units is Rs 30and the average variable cost Rs 3, total cost is : (Choose the correct alternative)
(a) Rs 3
(b) Rs 30
(c) Rs 270
(d) Rs 330
Complete the following table:
|
Output (Units) |
Average Fixed Cost (Rs ) |
Marginal Cost (Rs) |
Average Variable Cost (Rs) |
Average Cost (Rs) |
| 1 | 60 | 20 | ... | ... |
| 2 | ... | ... | 19 | ... |
| 3 | 20 | ... | 18 | ... |
| 4 | ... | 18 | ... | ... |
| 5 | 12 | ... | ... | 31 |
From the following total cost and total revenue schedule of a firm, find out the level of output, using marginal cost and marginal revenue approach, at which the firm would be is equilibrium. Give reasons for your answer.
| Output (Units) |
Total Revenue (Rs ) |
Total Cost (Rs ) |
| 1 | 10 | 8 |
| 2 | 18 | 15 |
| 3 | 24 | 21 |
| 4 | 28 | 25 |
| 5 | 30 | 33 |
Complete the following table:
| Output (Units) |
Average Fixed Cost (Rs ) |
Marginal Cost (Rs ) |
Average Variable Cost (Rs ) |
Average Cost (Rs ) |
| 0 | 30 | |||
| 1 | ... | ... | 30 | |
| 2 | 78 | ... | ... | ... |
| 3 | ... | 23 | ... | 10 |
| 4 | ... | ... | 23 | ... |
| 5 | 150 | ... | ... | 6 |
From the following table find out the level of output at which the producer will be in equilibrium (use marginal cost and marginal revenue approach).Give reasons for your answer.
| Output (Units) |
Total Revenue (Rs ) |
Total Cost (Rs ) |
| 1 | 16 | 14 |
| 2 | 30 | 27 |
| 3 | 42 | 39 |
| 4 | 52 | 49 |
| 5 | 60 | 61 |
Complete the following table:
| Output (units) |
Average Fixed Cost (Rs) |
Average Variable Cost (Rs) |
Marginal Cost (Rs) |
Total Cost (Rs) |
| 1 | 120 | 40 | ... | ... |
| 2 | 60 | 56 | ... | 232 |
| 3 | ... | 54 | ... | ... |
| 4 | 30 | ... | 54 | ... |
| 5 | ... | ... | ... | ... |
Distinguish between fixed and variable costs. Give one example of each.
What is meant by cost in economics?
Briefly explain the concept of the cost function.
