The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-If the cost borne by a firm when output is zero is $100 and that of producing 5 units is $250, then the variable cost of the firm is equal to $150.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-If the cost borne by a firm when output is zero is $100 and that of producing 5 units is $250, then the variable cost of the firm is equal to $150.

Quizplus · Accepted Answer

Variable cost is the cost that varies with changes in the level of output. In this case, the cost borne by the firm when output is zero is the fixed cost, which is given as $100. The cost of producing 5 units is $250, which includes both fixed and variable costs. Therefore, the variable cost of producing 5 units is given by:

Variable cost = Total cost at 5 units - Fixed cost 
= $250 - $100 
= $150

So, the statement is true and the answer is A.

The Figure Given Below Shows Three Short Run Average Total