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S4 Economics: Costs of Production – Foundation Practice (10 Questions)
S4 Economics: Costs of Production – Foundation Practice (10 Questions)
Ten items run from fixed and variable cost through total, average, average fixed and marginal cost calculations, each with a one-line note for first-time learners.
Quick answer 1. constant regardless of output, such as rent; 2. moves with output, such as materials; 3. total fixed cost; 4. it falls as fixed cost is spread; 5. 8,000, 80, 60 and 20; 6. 30; 7. the minimum of average cost; 8. fixed costs exist in the short run; 9. from 100 to 95; 10. fixed costs shape the shutdown decision.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 questions |
| Suggested time | about 20 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S4 Economics | Costs of Production: fixed cost, marginal cost and scale |
| Level | S4 |
02 Questions (10 items)
- FoundationWhat is a fixed cost? Give one example.
- FoundationWhat is a variable cost? Give one example.
- FoundationWhen output is zero, what does total cost equal?
- FoundationWhat happens to average fixed cost as output rises, and why?
- IntermediateA firm makes 100 units with total fixed cost of 2,000 and total variable cost of 6,000. Find total, average, average variable and average fixed cost.
- IntermediateOutput rises from 100 to 110 units and total cost from 8,000 to 8,300. What is marginal cost?
- IntermediateWhere do the average cost and marginal cost curves cross?
- ChallengeWhat distinguishes the short run from the long run?
- ChallengeA firm makes 50 units with fixed cost 1,500 and variable cost 3,500. If output rises to 60 and variable cost to 4,200, how does average cost change?
- Error redoA student says fixed costs do not change with output, so they are irrelevant to production decisions. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | A cost that does not change with output, such as factory rent. | Rent is still payable even at zero output, so it counts as a fixed cost. |
| 2 | A cost that changes with output, such as raw materials. | Raw materials are not bought when production stops, so the spending moves with output. |
| 3 | Total fixed cost. | With no production there is no variable cost, so only fixed cost remains. |
| 4 | It falls, because the same fixed cost is spread over more units. | The fixed total does not change while the divisor grows, so the average must fall. |
| 5 | Total cost 8,000, average cost 80, average variable cost 60 and average fixed cost 20. | Add the totals first, then divide each by output, and the four figures must agree. |
| 6 | 30, because 10 extra units add 300 to cost. | Marginal cost looks only at the cost added by the extra output, not at earlier averages. |
| 7 | At the minimum point of average cost. | A marginal value below the average pulls it down and one above pushes it up, so the crossing is the minimum. |
| 8 | The short run has fixed costs, while in the long run every cost is variable. | The dividing line is not calendar time but whether the firm can adjust all factors of production. |
| 9 | It falls from 100 to 95. | Spreading the fixed cost over more units offsets the higher variable cost, so average cost still falls. |
| 10 | Fixed costs still decide whether a firm shuts down in the short run, because revenue must cover variable cost first. | The shutdown test compares price with average variable cost, and that is exactly where fixed costs matter. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
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