Lecture 3

Question 1

Define marginal

Answer 1

change in a quantity when another quantity it depends on changes by a small amount

Question 2

Define marginal revenue

Answer 2

increase in revenue for small increase in quantity sold (demand)

Question 3

Define fixed costs

Answer 3

• Fixed costs = costs don’t change with the quantity

produced e.g. payroll, marketing, office/admin costs

Question 4

Define variable costs

Answer 4

• Variable costs = depend on quantity produced

e.g. raw material, direct labour, maintenance

Question 5

define total cost

Answer 5

Total cost - TC = TFC + TVC

Question 6

Define average cost

Answer 6

Average cost = cost per unit produced
• AFC - varies inversely with Q
- AVC - goes through minimum at some Q