Short Answer TypeWhat is the behaviour of average revenue in a market in which a firm can sell more only by lowering the price?
What is opportunity cost? Explain with the help of a numerical example.
An opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In other words, the cost of enjoying more of one good in terms of sacrificing the benefit of another good is termed as opportunity cost of the additional unit of the good.
Example: We have Rs 15,000 with two choices a) to invest in the shares of a company XYZ or b) to make a fixed deposit which gives interest 9%. If the company XYZ gives a return of 15%, we will benefit when we invest in the shares as the alternative would be less profitable. However if company’s return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% - 3% = 6%).
Draw Average Variable Cost, Average Total Cost ad Marginal Cost curves in a single diagram.
An individual is both the owner and the manager of a shop taken on rent. Identify implicit cost and explicit cost from this information. Explain.
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