Match the following. List-I List-II a. Fixed costs 1. Fall at first and then rise as the firm approaches full capacity b. Variable costs 2. Continue to fall at rate proportionate with the increase in output c. Total costs 3. Are those costs which do not increase as output increases d. Average total costs 4. Are the amount paid to all the factors employed in producing the output e. Average fixed costs 5. Are those costs which increase as output increase

The correct answer is: D. a-1, b-2, c-3, d-4, e-5

Fixed costs are those costs which do not increase as output increases. For example, the rent on a factory building is a fixed cost, because it does not change regardless of how much output the factory produces.

Variable costs are those costs which increase as output increases. For example, the cost of raw materials is a variable cost, because it increases as the factory produces more output.

Total costs are the sum of fixed costs and variable costs.

Average total costs are total costs divided by output.

Average fixed costs are fixed costs divided by output.

Here is a more detailed explanation of each of the terms:

• Fixed costs: Fixed costs are those costs that do not change with the level of output. They are also known as overhead costs. Examples of fixed costs include rent, insurance, and depreciation.
• Variable costs: Variable costs are those costs that change with the level of output. They are also known as direct costs. Examples of variable costs include the cost of raw materials and the cost of labor.
• Total costs: Total costs are the sum of fixed costs and variable costs. They are also known as total expense.
• Average total costs: Average total costs are total costs divided by output. They are also known as average expense.
• Average fixed costs: Average fixed costs are fixed costs divided by output. They are also known as average overhead.

I hope this explanation is helpful. Let me know if you have any other questions.