Question

1. why does average fixed cost decrease with increase in production?

2. what do you mean by fixed cost ? how is the fixed cost curve ?

3. state the limitations in measuring opportunity cost ?with diagram & schedule? (mark 5.)

explain different concept of cost of production ? (5 mark.) or( 6 mark.)

Qno.2
1. what is cost production . (2 mark)

2 difference between average cost and marginal cost / average fixed cost and total fixed cost ? (3 marks)

3. all cost are variable in long run explain.( 2 Mark)

4.explain with diagram the interrelationship between average cost and marginal cost ?( 5 mark. )


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Answer 1

1.Average fixed cost is fixed cost per unit of output. As the total number of units of the good produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.

2.In economics, average fixed cost (AFC) is the fixed costs of production (FC) divided by the quantity (Q) of output produced. Fixed costs are those costs that must be incurred in fixed quantity regardless of the level of output produced.

3.Though useful in decision making, the biggest drawback of opportunity cost is that it is not accounted for by company accounts. Opportunity costs often relate to future events, notes the Encyclopedia of Business, which makes it very hard to quantify.

4.Production or product costs refer to the costs incurred by a business from manufacturing a product or providing a service. Production costs can include a variety of expenses, such as labor, raw materials, consumable manufacturing supplies, and general overhead.

5.view picture pls

6.The long-run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only able to influence prices through adjustments made to production levels.

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