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Directions: Answer the questions based on the following information:
ABC Ltd. Produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. 800. Fixed monthly costs for second shift operation are estimated at Rs. 1200. Each shift operation provides capacity for producing 30 widgets per month.

Note: Average unit cost, AC = Total monthly cost / monthly production, and Marginal cost, MC is the rate of change in total cost for unit change in quantity produced.

What is the correct answer?


From the data provided it can be inferred that, for production levels in the range of 0 to 60 units,

A. MC in an increasing function of producing quantity.

B. MC is a decreasing function of production quantity.

C. Initially MC is a decreasing function of production quantity, attains a minimum and then it is an increasing function of production quantity.

D. None of the above

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