3.2 Costs

Question 1

Production costs in the short run?

Answer 1

At least one factor input is fixed

Question 2

Production costs in the long run?

Answer 2

All factor inputs are variable

Question 3

What are fixed costs?

Answer 3

Costs that do not vary with output

Question 4

Examples of fixed costs?

Answer 4

• Fixed salary costs
• Rent
• Insurance

Question 5

What are variable costs?

Answer 5

Costs that vary with output

Question 6

Example of variable costs?

Answer 6

• Wage costs
• Raw materials
• Fuel costs

Question 7

What will a change in fixed costs shift?

Answer 7

AC curve

Question 8

What will a change in variable costs shift?

Answer 8

AC (contains AVC) & MC curve