Problem 23 Which costs are measured on per-... [FREE SOLUTION]

Chapter 7: Problem 23

Which costs are measured on per-unit basis: fixed costs, average cost, average variable cost, variable costs, and marginal cost?

Short Answer

Expert verified

Average cost, average variable cost, and marginal cost are measured on a per-unit basis. Fixed costs and variable costs are not directly measured on a per-unit basis, but they influence the per-unit costs.

Step by step solution

Fixed Costs

Fixed costs are not measured on a per-unit basis since they remain the same irrespective of the level of production. Hence, fixed costs are not measured on a per-unit basis.

Variable Costs

Variable costs change with the level of production but are not directly measured on a per-unit basis. However, they can influence the per-unit costs because higher production levels may lead to lower variable costs per unit.

Average Cost

Average cost is calculated by dividing the total cost (both fixed and variable costs) by the number of units produced. It considers both types of costs and gives a per-unit measurement. So, average cost is measured on a per-unit basis.

Average Variable Cost

Average variable cost is calculated by dividing the total variable cost by the number of units produced. It is a measurement of the per-unit variable cost, thereby making it measured on a per-unit basis.

Marginal Cost

Marginal cost is the additional cost incurred for producing one more unit of output. It measures the cost per extra unit produced, thus making it a per-unit cost measure. In conclusion, average cost, average variable cost, and marginal cost are measured on a per-unit basis. Fixed costs and variable costs are not directly measured on a per-unit basis, but they influence the per-unit costs.