SYMBIOSIS INTERNATIONAL (DEEMED UNIVERSITY)

(Established under Section 3 of the UGC Act 1956)

Re-accredited by NAAC with ‘A’ grade (3.58/4) Awarded Category – I by UGC

Program: BBA-LLB (Hons)

Batch: 2021-26

Semester: II

Course Name: Managerial Economics

PRN: 21010126271

INSTRUCTIONS

1. Mention your details only in the space provided above. If any other details
name, contact detail etc. are written anywhere else in the answer script it will
be treated as adoption of unfair means.
2. Use diagrams and sketches wherever required.
3. Submission must be done by the student through google form link provided
by the examination department and all submissions must be in the word
format only(.doc/.docx). Submission of any other format will not accepted.
4. Submission will not be accepted beyond the deadline given by the
examination department in each subject. Student will be marked absent in
case of late submission.
5. Formatting guidelines: Font size & name: 12 & Times New Roman; Line
spacing 1.5; Justified; Page size: A4; No borders
6. Write your answer in your own language and do not copy paste from any
source. Read the question carefully and write your answer fulfilling the
requirements of the question.
7. If the students copy from each other’s assignment, it will be considered as
unfair means case and performance will be treated as null and void for the
entire examination.
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Labour Product Marginal Fixed cost Variable Total Cost Average Marginal
product Cost Total Cost Cost
0 0 0 12 0 12 - -
1 6 6 12 3 15 2.5 0.5
2 15 9 12 6 18 1.2 0.33
3 21 6 12 9 21 1 0.5
4 24 3 12 12 24 1 1
5 26 2 12 15 27 1.03 1.5

a) Fixed costs are those that cannot be altered regardless of the performance of the firm. The
overall fixed costs of a corporation will be independent of its production level or sales
volume.
Regardless of whether your business is thriving or struggling, fixed expenses will remain
basically unchanged. Despite fluctuations in output or sales, fixed expenses stay constant.
Consider them to be what you are obligated to pay, even if you sell nothing.
Monthly rent, energy bills, and employee wages might be examples of fixed costs.
In the question-given scenario, the firm fixed cost is 12. The company had to pay12 even
though its output was zero.

b) The relationship between average and marginal costs should be highlighted. This relationship
should be thoroughly comprehended.
When average costs are decreasing, marginal costs are less than average costs, and when
average costs are increasing, marginal costs are greater than average costs.
However, if marginal costs remain unchanged, average and marginal costs are equal.
In the table, the average cost of up to 24 products is declining, and marginal cost is smaller
than its corresponding average cost. from 24 to 26 units, the average cost rises. The table
demonstrates that the marginal cost in this range is more than the average cost.
Using a simple illustration, the link between average and marginal cost can be clearly
described. Instead of considering prices, consider your performance on a series of exams.
Assume that your class grade average is 85. Your new average would be less than 85 if you
had a score of 80 on your next examination. In other words, your average score would fall.
If you received a score of 90 on your next examination, this grade would increase your
average, and your new average would be greater than 85. Alternatively, your average score
would rise.
If you received an exam score of 85, your average would not change.
To return to the context of production costs, think of the average cost for a specific quantity
of output as the current average grade and the marginal cost for that quantity as the grade on
the next exam.
However, marginal cost at a given quantity can alternatively be viewed as the incremental
cost associated with the next unit produced. This distinction becomes unimportant when
marginal cost is calculated based on extremely modest changes in output quantity.
In accordance with the grade analogy, the average cost per unit of output will decrease when
marginal cost is less than average cost and increase when marginal cost is more than average
cost. When marginal cost at a particular amount is equal to average cost at that quantity,
average cost is neither falling nor increasing.
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