Topic 7- Costs

Question 1

Average costs

Answer 1

Average fixed costs: is the cost per unit
Formula: TFC/Q
Average variable costs: the costs per unit
Formula: AVC= TVC/Q

Question 2

Marginal cost

Answer 2

Marginal cost is the change in total costs from increasing output by one extra unit
MC= change in TC/change in Q

Question 3

Law of diminishing marginal costs

Answer 3

At some point the number of employees is more than the amount needed the amount needed to produce a given product>production is less efficient& as you employ ,ore workers the marginal cost increases

Question 4

Total costs

Answer 4

• fixed costs: costs which do not change with output e.g rent, property tax
• variable costs: costs which do increaSe with output e.g wages, basic raw material