Average Variable Cost: Exam Questions on Microeconomics – Chapter 4

Summary

Microeconomics is the study of how individuals and firms make decisions. This document gives exam questions on average variable cost. It gives practice with the concepts and calculations involved.

Total Costs and Variable Costs

Total costs are the sum of fixed and variable costs. Variable costs change with the level of output. A firm's fixed costs are found by subtracting variable costs from total costs.

Production Techniques and Marginal Cost

Firms choose production techniques to minimise costs. After a point, adding more of a variable input increases marginal cost. This is the point of diminishing returns.

Average Variable Cost and Marginal Cost

Average variable cost is total variable cost divided by output. It decreases at first, then increases. It is at its lowest point where it equals marginal cost.

Exam Questions

The document gives exam questions on these topics. It asks students to calculate costs and to interpret graphs. It asks students to explain the relationships between different costs.

Key terms

Total Costs

The sum of a firm's fixed and variable costs.

Variable Costs

Costs that change with the level of output.

Marginal Cost

The cost of producing one more unit of output.

Average Variable Cost

Total variable cost divided by the quantity of output.

Diminishing Returns

The point at which adding more of a variable input increases marginal cost.

Production Techniques

The methods a firm uses to produce its output.

Questions this document helps with

• How do you find a firm's fixed costs?
• What happens to marginal cost after diminishing returns?
• When is average variable cost at its lowest?

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