Question

Total Cost divided by Quantity, Total Cost#2 minus Total Cost#1, Total Cost minus Fixed Cost are...………….,respectively; Select one: a. Average Total Cost, Average Variable Cost and Marginal Cost b. Average Variable Cost, Average Cost and Marginal Cost c. Average Total Cost, Marginal Cost and Variable Cost d. Marginal Cost, Average Cost and Average Variable Cost e. Average Variable Cost, Marginal Cost and Average Total Cost

Answer 1

1) Average Total Cost

It refers to the total cost per unit hence it is calculated as total cost divided by quantity.

Average total cost = Total Cost / Quantity

Quantity	Total Cost	Average Total Cost
2	100	50

2) Marginal Cost

It refers to the change in total cost when additional units are produced.

Marginal Cost = Change in Total Cost / Change in Quantity

Quantity	Total Cost	Marginal Cost
1	100	--
2	250	150

3) Variable Cost

Variable cost refers to the cost which changes with change in output. For example - labor cost

Total Cost = Fixed Cost + Variable Cost

Hence

Variable Cost = Total Cost - Fixed Cost

Quantity	Total Cost	Fixed Cost	Variable Cost
1	100	50	50

Option C is correct