Costs

Question 1

What are fixed costs?

Answer 1

Fixed cost or total fixed cost are costs that do not vary with output

Question 2

What is the formula for average fixed cost?

Answer 2

AFC = TFC/output

Question 3

What are variable costs?

Answer 3

Variable costs are costs that vary with output

Question 4

What is the formula for total variable cost?

Answer 4

TVC = VC * output

Question 5

What is the formula for average variable cost?

Answer 5

AVC = TVC/ output

Question 6

What is the formula for total cost?

Answer 6

TC = TVC + TFC

Question 7

When does the short run occur?

Answer 7

When at least some costs are fixed

Question 8

When does the long run occur?

Answer 8

When all costs can be variable

Question 9

What is the formula for average cost?

Answer 9

AC or ATC = TC/output

Question 10

What is marginal cost?

Answer 10

Marginal cost is the cost of producing an additional unit of output

Question 11

What is the formula for marginal cost?

Answer 11

Change in total cost/change in output

Question 12

What is the relationship between AC and MC curves?

Answer 12

• The MC curve always cuts the AC curve at its lowest point
• When MC is less than AC then AC is falling
• When MC is greater than AC then AC is rising