fixed and variable costs

Question 1

different types of costs

Answer 1

-explicit costs (require physical payment): fixed- do not vary with output(rent, salaries, interest on loans) and variable-do vary with output (wages, utility bills, raw material costs, transport)
-implicit costs (opportunity cost)

Question 2

equation for total fixed costs, average fixed costs and graph

Answer 2

total fixed costs: straight horizontal (TC-TVC)
average fixed costs tfc/q or AC-AVC, curved going down

Question 3

average variable cost

Answer 3

-eqn: tvc/q
-due to law of diminishing returns
-positive parabola