NCERT Solutions Class 12 Economics Cost. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.
Question 1. Briefly explain the concept of the cost function.
Answer: Cost function shows functional relationship between output and cost of production. It gives the least cost combination of inputs corresponding to different levels of output. Cost function is given as:
C = f(X), ceteris paribus,
where, C = Cost and X = Output
Question 2. What are total fixed cost, total variable cost and total cost of a firm? How are they related?
Draw TVC, TC, and TFC curves in a single diagram. [AI 2012][CBSE Sample Paper 2013]
Answer: (i) TC is divided into two parts TFC and TVC such that TC = TFC + TVC.
(ii) TFC is the overhead cost and it remains constant or fixed whatever be the level of output. TFC curve is a horizontal line parallel to the x- xis.
(iii) TVC is cost due to increased use of variable factors like raw material, labour, etc. TVC is inverse S-shaped starting from the origin due to law of variable proportion.
(iv) TC is aggregate of TFC and TVC. TC curve is inverse S-shaped starting from the level of fixed cost. The reason behind it shape is the law of variable proportion.
Question 3. What are the average fixed cost, average variable cost and average cost of a firm? How are they related?
Answer: AFC: The per unit cost incurred on fixed factors of production is known as average fixed cost.
AFC always decreases as the firm increases the level of production. AVC: It is variable cost per unit of output produced.
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