Practice Costs (3.7) - Production and Costs - CBSE 12 Introductory Microeconomics

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6 sample questions

Question 1.
Define total fixed costs.
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Think about costs that remain the same each month.
Question 2.
What happens to variable costs when production increases?
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Consider materials and labor as output rises.
3Question 3.
What are total fixed costs?
- Costs that change with output
- Costs that remain constant
- Costs that vary periodically
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Think about expenses that do not increase as sales increase.
4Question 4.
True or False: Variable costs decrease as production increases.
- True
- False
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Relate this to inputs needed for manufacturing.
Question 5.
A firm has fixed costs of $10,000 and variable costs of $3 per unit produced. Calculate the average cost if 1,000 units are produced.
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Add fixed and variable costs first before averaging.
Question 6.
In a competitive market, a firm notices its marginal costs start rising as output increases. Discuss the potential implications for its pricing strategy.
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Connect cost rises with pricing strategies.

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