Podcast
Play an AI-generated podcast conversation about this lesson
Questions and Answers
What happens to average variable costs as output declines?
What happens to average variable costs as output declines?
- They fluctuate randomly
- They decrease
- They increase (correct)
- They remain constant
How are average variable costs affected by changes in marginal product?
How are average variable costs affected by changes in marginal product?
- They decrease when marginal product rises
- They increase when marginal product rises
- They increase when marginal product declines (correct)
- They decrease when marginal product declines
In what scenario do average variable costs decrease?
In what scenario do average variable costs decrease?
- When marginal product declines
- When output rises
- When marginal product rises (correct)
- When output declines
Study Notes
Average Variable Costs and Output
- As output declines, average variable costs (AVC) increase, because fixed costs are spread over fewer units of output.
- When output increases, AVC decreases, as fixed costs are spread over more units of output.
Relationship Between Average Variable Costs and Marginal Product
- When marginal product increases, average variable costs decrease, because more output is being produced with the same variable inputs.
- When marginal product decreases, average variable costs increase, because less output is being produced with the same variable inputs.
Scenario for Decreasing Average Variable Costs
- Average variable costs decrease when there are improvements in production technology or management practices, allowing for more output to be produced with the same variable inputs.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of average variable costs with this multiple-choice quiz. Explore how average variable costs are impacted by changes in output and marginal product, and see if you can identify the correct relationships.
