﻿ Define fixed cost. Give an example. Explain with reason the beha

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# 11.Define fixed cost. Give an example. Explain with reason the behaviour of Average Fixed Cost as output is increased.

Fixed cost is the sum of all expenditures incurred to acquire a fixed asset. It does not change with an increase or decrease in the amount of goods or services produced or sold. Like - Purchase of plant & machinery.
Average fixed cost is the fixed cost per unit of output. Average fixed cost curve slopes downward to the right. It shows that AFC decreases as output increases. It is a rectangular hyperbola curve. It means that the product of AFC and output is equal to TFC which remains constant at all levels of output.
TFC = AFC * Q
Therefore,

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12.

Define marginal product. State the behaviour of marginal product when only one input is increased and other inputs are hold constant.

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13.

When price of a commodity falls from Rs 12 per unit to Rs 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply

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14.

Why do central problems of an economy arise? Explain the central problem of 'for whom to produce'?

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15.

Explain three properties of indifference curves.

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16.

Examine the effect of (a) fall in the own price of good X and (b) rise in tax rate on good X, on the supply curve. Use diagrams.

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17.

Explain the implications of the following in a perfectly competitive market
(a) Large number of sellers
(b) Homogeneous products.

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18.

Explain the implications of the following in an oligopoly market:
(a) Barriers to entry of new firms
(b) A few or a few big sellers

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19.

Define flows.

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20.

National income is the sum of factor incomes accruing to:(Choose the correct alternative):
(a) Nationals
(b) Economic territory
(c) Residents
(d) Both residents and non-residents

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