Fixed And Variable Costs

Question 1

What is a fixed cost

Answer 1

A fixed costs is a cost which does not vary with output it needs to be paid

Question 2

What are some examples of fixed costs

Answer 2

• salaries
• rent costs
• interest payments
  Insurance
• advertisement

Question 3

Draw total costs and average fixed costs on a graph

Answer 3

• total fixed costs are a straight line
• average fixed costs is sloping downwards

Question 4

Expalin the AFC curve

Answer 4

As output increases, the fixed costs are spread out amongst a bigger range of output

Question 5

What are variable costs

Answer 5

Variable costs are costs whuch do vary with output

Question 6

What are some examples of Variable costs

Answer 6

• wages of short term staff
• raw material prices
• fuel costs

Question 7

Draw average variable costs

Answer 7

U

Question 8

Explain the AVC curve

Answer 8

• law of dismissing returns