Question on: JAMB Economics - 2014
The short-run average variable cost of a firm will rise owing to
A
the expansion of factory space
B
the building of new warehouse
C
an increase in the cost of labour
D
an increase in the salaries of directors
Ask EduPadi AI for a detailed answer
Correct Option: C
The short-run average variable cost (AVC) is the per-unit cost of the variable inputs used in production. In the short run, some factors of production are fixed (e.g., factory space, warehouses), while others are variable (e.g., labor, raw materials).
- An increase in the cost of a variable input directly increases the AVC.
- Options A, B, and D involve costs that are either fixed or related to fixed inputs.
- An increase in the cost of labour is a direct variable cost, so an increase will cause the AVC to rise.
Add your answer
Please share this, thanks!
No responses