Question

Assertion (A): Total variable cost (TVC) changes in the short-run.

Reason (R): The quantity of variable factors used in the short-run varies in accordance with the level of output.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true, but Reason (R) is false.

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Total variable cost (TVC) is the expenditure incurred on variable inputs like raw materials and casual labour. The assertion is true because these costs directly fluctuate as production scales up or down. The reason is also true and perfectly explains the assertion because a firm must hire more variable factors to increase its output level, which directly drives up the total variable cost.