Basic Cost Concepts: Total, Average, Marginal, Fixed And Variable Cost - SS2 Economics Past Questions and Answers - page 1
What is total cost?
The additional cost incurred by producing one more unit of output
The cost that does not change with the level of production
The sum of all the costs incurred in the production process
The total cost divided by the quantity of output produced
What is the average cost?
The additional cost incurred by producing one more unit of output
The cost that does not change with the level of production
The sum of all the costs incurred in the production process
The total cost divided by the quantity of output produced
What is marginal cost?
The additional cost incurred by producing one more unit of output
The cost that does not change with the level of production
The sum of all the costs incurred in the production process
The total cost divided by the quantity of output produced
What is fixed cost?
The additional cost incurred by producing one more unit of output
The cost that does not change with the level of production
The sum of all the costs incurred in the production process
The total cost divided by the quantity of output produced
What is a variable cost?
The additional cost incurred by producing one more unit of output
The cost that does not change with the level of production
The sum of all the costs incurred in the production process
The total cost divided by the quantity of output produced
How do you calculate the marginal cost?
To calculate marginal cost, you need to find the change in total cost when one more unit of output is produced. The formula for marginal cost is: MC = ΔTC/ΔQ, where MC is marginal cost, ΔTC is the change in total cost, and ΔQ is the change in the quantity of output.
Give an example of a fixed cost and a variable cost.
An example of a fixed cost is rent for a factory or office space. The cost remains the same regardless of how much output is produced. An example of a variable cost is the cost of raw materials or labour, which increases or decreases with the level of production.