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Calculation of Average Variable Cost and Total Variable Cost

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Calculation of Average Variable Cost and Total Variable Cost

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Questions and Answers

Where does AVC reach its minimum?

At point O

At point Q (correct)

At point S

At point P

What happens to SAC to the left of q2?

SAC is rising

SAC is equal to SMC

SAC is falling (correct)

SAC is constant

Where does the SMC curve intersect the SAC curve in Figure 3.8?

Point Q

Point O

Point S (correct)

Point P

In the long run, what happens to fixed costs?

Fixed costs remain the same Signup and view all the answers

What does LRAC represent?

Total cost per unit of output Signup and view all the answers

When is AVC greater than SMC?

To the right of q1 Signup and view all the answers

What is the relationship between SAC and AVC initially as output increases?

SAC falls as AVC rises Signup and view all the answers

At what point does the rise in AVC become larger than the fall in AFC according to the text?

After a certain level of production Signup and view all the answers

Where does the minimum point of SAC curve lie compared to the minimum point of AVC curve?

To the right Signup and view all the answers

When does SMC become greater than SAC according to the text?

When SAC is rising Signup and view all the answers

What is the shape of the SAC curve described in the text?

'U'-shaped Signup and view all the answers

What does the SMC curve do to the SAC curve at the minimum point of SAC?

Cuts from below Signup and view all the answers

What is the formula for Average Fixed Cost (AFC)?

AFC = TFC / q Signup and view all the answers

At what level of output is the Short Run Average Cost (SAC) equal to the Average Variable Cost (AVC)?

Output level 5 Signup and view all the answers

What does the Short Run Marginal Cost (SMC) represent?

The increase in Total Variable Cost (TVC) Signup and view all the answers

How is Total Variable Cost (TVC) calculated?

TVC = TVC - AFC Signup and view all the answers

Which cost curve represents the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC)?

Total Cost (TC) Signup and view all the answers

What does Marginal Cost represent in the short run?

The increase in Total Variable Cost (TVC) due to one more unit of output Signup and view all the answers