Question : If the average total cost is Rs. 54, the total fixed cost is Rs. 45,000 and the quantity produced is 2500 units, find the average variable costs (in Rs.) of the firm.
Option 1: 24
Option 2: 18
Option 3: 36
Option 4: 60
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Correct Answer: 36
Solution : The correct option is 36.
The formula is Average Variable Cost(AVC) = Average Total Cost(ATC)− Average Fixed Cost(AFC).
Given that the Average Total Cost (ATC) is Rs. 54, and the Average Fixed Cost (AFC) is calculated as Total Fixed Cost divided by the Quantity Produced:
AFC = Total Fixed Cost / Quantity Produced; AFC = 45000 / 2500 = 18.
Substitute these values into the formula for Average Variable Cost: 54 − 18 = 36.
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