PRESTIGE CONVENT SR.SEC.SCHOOL
B-5,Sector-8, Rohini, Delhi-110085
ASSIGNMENT – CONCEPT OF COST
CLASS – XII
Session – 2015-16
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This assignment contains two sections A and B
Both the sections are compulsory.
Make diagrams wherever necessary.
Adhere to the word limit and answer the questions neatly.
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SECTION - A
Q1. Distinguish between variable cost and fixed cost. Give two examples of each.
Q2. Relationship between AC and MC with the help of a cost schedule.
Q3. Relationship between AVC and MC.
Q4 Why does difference between ATC and AVC (or AFC) decrease with increase in level of output?
Explain.
Q5. Why is AC curve U-shaped?
Q6. What is behaviour of AFC and TVC as output increases?
Q7. An individual is both the owner and the manager of a shop taken on rent. Identify implicit cost
and explicit costs. Explain
Q8. Draw AVC, ATC and MC curves in a single diagram.
Q9 Complete the following table:
OUTPUT : 1
2
3
4
5
18
__
20
22
AVC :
__
TC :
60
__
__
120
__
MC :
20
__
18
__
__
Q10.Given below is the cost schedule of a firm.It’s average fixed cost is Rs 20 when it produces 3
units.Calculate its MC and AC at each given level of output:
OUTPUT :
AVC :
1
30
2
3
28
32
SECTION - B
HOTS AND MULTIDISCIPLINARY QUESTIONS
Q11. A producer starts a business by investing his own savings and hiring a labour. Identify the implicit
and explicit costs from this information. Explain
Q12. Suppose a firm’s TFC is Rs 10 and MC schedule is given below:
OUTPUT :
MC :
1
10
2
20
3
4
5
6
7
30
40
50
60
70
a) Is the MC curve U- shaped?
b) Derive AVC schedule. Will AVC curve be U- shaped? Discuss why or why not?
Q13 A producer takes a building on rent for carrying out a business. He looks after the business himself.
Identify the implicit and explicit costs from this information. Explain.
Q 14 What is the behaviour of average fixed cost as output is increased? Why is it so?
Q15. Water charges is increased for commercial use.Would it affect fixed cost or variable cost of the
firm? Explain with reason.
Q17. State true or false giving reasons:
a)
b)
c)
d)
TC and TVC curves are parallel to each other.
Both AC and MC curves are inverted U-shaped.
As output increases the gap between AC and AVC curves increases.
MC curve cuts AC curve from below.
Q18. Show graphically that area under MC curve is equal to total variable cost(TVC).
Q19.ATC must fall simply because AFC always falls. Comment.
Q20. Identify fixed and variable cost from the given table :
a)
b)
c)
d)
e)
f)
Wage bills.
Telephone bill above minimum.
Rent of the premises.
Interest.
Salary of permanent employees.
Fuel charges.