If the total cost increases from Rs 500 to Rs 600 when the output goes up from 20 to 30 units, and the fixed costs are Rs 200, which of the following statements is correct?

Show Answers

The marginal cost amounts to Rs 20The average cost increasesVariable costs increase by Rs 200The initial average fixed cost was Rs 10

Explanation

Given the total cost rises by Rs 100 for an increase of 10 units, the marginal cost is Rs 10 per unit, not Rs 20. Variable costs increase by Rs 100, not Rs 200. The average fixed cost at 20 units is Rs 10 (Rs 200 ÷ 20). Since total cost per unit rises from Rs 25 (500 ÷ 20) to Rs 30 (600 ÷ 30), the average cost increases. Therefore, the correct statement is that the average cost rises.