Question

Calculate the AVC and MC at each level of output from the following cost schedule of a firm.

Output (Units)	0	1	2	3	4
Total cost (₹)	60	75	96	123	152

Answer 1

Given:

Output (Units)	0	1	2	3	4
Total cost (₹)	60	75	96	123	152

Step 1: Fixed Cost (TFC)

At output 0, Total Cost = ₹ 60

So, TFC = ₹ 60

Step 2: AVC (Average Variable Cost)

Use: AVC = (Total Cost − Fixed Cost) ÷ Output

• At 1 unit: AVC = (75 − 60) ÷ 1 = ₹ 15
• At 2 units: AVC = (96 − 60) ÷ 2 = ₹ 18
• At 3 units: AVC = (123 − 60) ÷ 3 = ₹ 21
• At 4 units: AVC = (152 − 60) ÷ 4 = ₹ 23

Step 3: MC (Marginal Cost)

Use: MC = Change in Total Cost

• From 0 to 1 unit: MC = 75 − 60 = ₹ 15
• From 1 to 2 units: MC = 96 − 75 = ₹ 21
• From 2 to 3 units: MC = 123 − 96 = ₹ 27
• From 3 to 4 units: MC = 152 − 123 = ₹ 29

Output	AVC (₹)	MC (₹)
1	15	15
2	18	21
3	21	27
4	23	29