Micro

Production & Costs

Medium

For a hypothetical firm, the total cost of producing 5 units of a commodity is Rs. 310 and that of producing 8 units is Rs. 850. If the firm has to spend Rs. 50 even when there is no output, what will be the marginal cost of producing the 8th unit?

Rs. 50

Rs. 180

Rs. 270

Rs. 540

✅ Correct Option: 2

Option 1 -> Rs. 50 is the fixed cost, not the marginal cost of the 8th unit.

Option 2 -> Change in TC from 5 to 8 units = 850 - 310 = Rs. 540 for 3 units. Average MC = 540/3 = Rs. 180 per unit.

Option 3 -> Rs. 270 would be incorrect as it doesn't match the calculation from the given data.

Option 4 -> Rs. 540 is the total change in cost for 3 units (6th, 7th, 8th), not the marginal cost of just the 8th unit.

Hence, Option 2: Rs. 180 -> Marginal cost is the additional cost of producing one more unit. From the data: TC at 8 units = Rs. 850, TC at 5 units = Rs. 310. Change in total cost = 850 - 310 = Rs. 540 for producing 3 additional units (6th, 7th, and 8th). Assuming constant marginal cost over this range, MC = 540 ÷ 3 = Rs. 180. Therefore, the marginal cost of producing the 8th unit is Rs. 180. -> correct

2025: 30 May Shift 1

Which of the following cost curve has the shape of a rectangular hyperbola?

2026: 21 May Shift 1

When a proportional increase in all inputs results in an increase in output by the half proportion, then the production function is said to display which returns to scale?

2025: 15 May Shift 1

Choose the correct options with reference to short-run average costs.

(A) Average total cost = total cost / quantity of output

(B) Average total cost = average variable cost + average fixed cost

(D) Average fixed cost = average variable cost - average cost

Choose the correct answer from the options given below:

2025: 27 May Shift 2

In inverse 'U'-shaped average product curve; as long as the value of Marginal Product remains higher than the value of the average product, in this condition the average product continues to ..........

2025: 13 May Shift 2

In which condition, the average cost of a firm declines when output increases?

2025: 30 May Shift 1

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For a hypothetical firm, the total cost of producing 5 units of a commodity is Rs. 310 and that of producing 8 units is Rs. 850. If the firm has to spend Rs. 50 even when there is no output, what will be the marginal cost of producing the 8th unit?

Solution

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