COST OF PRODUCTION

Production is best defined as:

• Selling goods to consumers

• Transforming inputs into outputs

• Setting prices in the market

• Maximising profit

Total Fixed Cost (TFC):

• Changes with output

• Is zero in the short run

• Remains constant at all output levels

• Increases with production

Average Fixed Cost (AFC) decreases because:

• Fixed cost increases

• Variable cost decreases

• Output increases

• Fixed cost is spread over more units of output

Which formula is correct?

• AC = AFC − AVC

• AC = TC ÷ Q

• MC = TC ÷ Q

• AVC = TFC ÷ Q

Marginal Cost (MC) is defined as:

• Total cost divided by output

• Change in output divided by change in cost

• Change in total cost divided by change in output

• Fixed cost per unit

Variable cost is a cost that:

• Does not change with output

• Exists only in the long run

• Changes with the level of output

• Is always zero

Which cost curve normally intersects AVC and AC at their minimum points?

• AFC

• LRAC

• MC

• TC

The short run is defined as a period when:

• All inputs are fixed

• All inputs are variable

• At least one input is fixed

• Firms earn zero profit

A firm produces 100 units of output has an average cost (AC) of RM 200 and average variable cost ( AVC) of RM 150.The firm total fixed cost ( TFC) is _________________.

• RM50

• RM550

• RM5000

• RM5500

Based on the table above, the total variable cost at output six is RM 169.20

• TRUE

• FALSE