GENERAL KNOWLEDGE

Detailed explanation-1: -Average cost-Average cost is not actual cost, It is obtained by dividing the total cost by the total output. cost output relationship plays an important role in determining the optimum level of production.

Detailed explanation-2: -Answer and Explanation: The optimal level of production is where the marginal revenue (MR) equals the marginal cost (MC). This is because as long as MR>MC, the gain from producing one more unit is greater than the loss of producing one more unit. So, it is beneficial to produce more.

Detailed explanation-3: -These costs are dependent on factors like market demands and trends, availability and shipping charges. If the market demand is high, the company may require to spend more on acquiring raw materials and on utility expenses to scale up the production.

Detailed explanation-4: -Key Takeaways. Production costs refer to the costs a company incurs from manufacturing a product or providing a service that generates revenue for the company. Production costs can include a variety of expenses, such as labor, raw materials, consumable manufacturing supplies, and general overhead.

Detailed explanation-5: -Variable costs are dependent on production output or sales. The variable cost of production is a constant amount per unit produced. As the volume of production and output increases, variable costs will also increase.