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JAMB Economics 1982 Question 19

Question 19

Theory of Costs and Revenue

If AC = Average Cost of production, TC = Total Cost of production, VC = Variable Cost of production, FC = Fixed Cost of production, Q = Quantity of goods produced, then

  1. A.AC = TC/Q; TC = VC + FC
  2. B.AC = (TC) Q; TC = VC + FC
  3. C.AC = TC/Q; TC = (VC)(FC)
  4. D.AC = TC − FC; VC = TC − AC
  5. E.AC = TC/Q; TC = VC + AC
Show the answer and explanation

Answer: A (AC = TC/Q; TC = VC + FC)

Explanation

Average cost is total cost divided by output, and total cost is the sum of fixed and variable costs.