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Difficulty: EasyShort-Run Cost Concepts and Calculations

Match each short-run cost concept in Column I with its correct economic definition or mathematical formula in Column II.

  • Total Fixed Cost (TFC)Expenditure that remains constant regardless of the level of output
  • Marginal Cost (MC)The addition to total cost from producing one more unit of output
  • Average Variable Cost (AVC)Total variable cost divided by total quantity produced (\text{TVC} / Q)

Answer

Total Fixed Cost matches with expenditure that remains constant regardless of output; Marginal Cost matches with the addition to total cost from producing one more unit of output; Average Variable Cost matches with total variable cost divided by total quantity produced.
Each short-run cost concept is paired accurately with its definition: Total Fixed Cost represents expenditures invariant to output level, Marginal Cost measures the incremental cost per additional unit produced, and Average Variable Cost calculates variable cost per unit of output.

Step-by-Step Solution

1
Identify the definition of Total Fixed Cost (TFC)
TFC is the cost that remains unchanged even when output is zero or increasing.
By definition, fixed costs are independent of the level of production in the short run.
2
Identify the definition of Marginal Cost (MC)
MC equals the change in total cost resulting from an additional unit of output (\Delta \text{TC} / \Delta Q).
Marginal analysis specifically evaluates incremental changes per unit.
3
Identify the definition of Average Variable Cost (AVC)
AVC is calculated by dividing total variable cost by total output quantity (\text{TVC} / Q).
Average concepts always divide the total aggregate cost by the quantity produced.

Key Concept

Short-run cost concepts, formulas, and definitions
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Topics

Short-Run Cost Concepts and Calculations

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