Question

Which of the following equations is correct?

• A. Average variable cost = \(\frac{\text{Total variable cost}}{\text{Output}}\)
• B. Total variable cost = Average Variable Cost \(\times\) Quantity
• C. Average cost = \(\frac{\text{Total cost}}{q}\)
• D. All of these

Hint:

Average costs are derived by dividing total costs (or total variable costs) by the quantity of output produced.

Answer 1

The Correct Option is D

Step 1: Understanding cost equations.
The cost equations relate the total cost, variable cost, average cost, and output in production. Each equation describes a different aspect of how costs are calculated.

Step 2: Analyzing the options.
(A) Average variable cost = \(\frac{\text{Total variable cost}}{\text{Output}}\): Correct. This is the correct definition of average variable cost. It is the total variable cost divided by the number of units produced.
(B) Total variable cost = Average Variable Cost \(\times\) Quantity: Correct. This equation correctly relates total variable cost to average variable cost and quantity.
(C) Average cost = \(\frac{\text{Total cost}}{q}\): Correct. Average cost is defined as the total cost divided by the number of units produced.
(D) All of these: Correct. All of the equations listed above are valid cost equations.

Step 3: Conclusion.
The correct answer is (D) because all of the equations are correct.