Variable cost divided by quantity produced is
a. average
total cost.
b. marginal
cost.
c. profit.
d. None
of the above are correct.
The correct answer and explanation is :
The correct answer is:
a. Average total cost.
Explanation:
Variable cost divided by the quantity produced refers to the average variable cost (AVC), not the average total cost (ATC). However, since “None of the above” is an option and AVC is not explicitly listed, the best answer from the given choices is “None of the above are correct.”
To clarify:
- Variable Cost (VC) refers to costs that change with production levels, such as raw materials, labor, and energy.
- Quantity Produced (Q) is the number of units made.
- Average Variable Cost (AVC) = VC / Q
Let’s analyze the answer choices:
- Average Total Cost (ATC) = (Total Cost) / (Quantity) = (Fixed Cost + Variable Cost) / Quantity. Since ATC includes fixed costs as well, it is not the same as VC / Q. So, (a) is incorrect.
- Marginal Cost (MC) is the additional cost incurred by producing one more unit of output, calculated as the change in total cost divided by the change in quantity. Since VC/Q is not the same as marginal cost, (b) is incorrect.
- Profit is revenue minus total cost, which is unrelated to variable cost divided by quantity. So, (c) is incorrect.
Since none of the provided answers correctly define VC/Q, the best choice is (d) None of the above are correct.
Visual Representation:
Relationship between Variable Cost, Average Variable Cost, and Marginal Cost.
Here is the graphical representation illustrating cost concepts, including Average Variable Cost (AVC), Marginal Cost (MC), and Total Cost (TC).