Question

2. average variable cost offers a degree of _______ cost per item.

a. marginal

b. variable

c. fixed

d. total

3. short run is the period of time in which ________ elements of production exist.

a. fixed

b. average

c. variable

d. marginal

4. which of the following cost are variable costs for a candy plant? (select all that apply)

a. electricity to power the candy manufacturing machines

b. costs of material for wrapping

c. expenses for an accountant to formulate the tax returns

d. fees to design the candy wrappers

Answer 1

Answer

2. b. Variable.

Average variable cost offers a degree of variable cost per item.

The average variable cost(AVC) is the variable cost(VC) per unit of output(Q). It shows the amount of VC per item.

AVC = VC / Q

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3. a. Fixed

Short run is the period of time in which fixed elements of production exist.

The short-run is a period of time, in which some factors or elements of production can not be changed. These factors or elements remain fixed in the short-run. So, the short run is the period of time in which fixed elements of production exist.

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4. The following are the variable costs for a candy plant;

a. Electricity to power the candy manufacturing machines.

b. Costs of material for wrapping.

The variable costs vary with the unit of production.The electricity to power the candy manufacturing machines, depends on how long the candy manufacturing machines are working to manufacture the candies. The electricity cost on candy manufacturing machines depends on the electricity everyday the machines consume. So , the cost on electricity to power the candy manufacturing machines is variable cost.

The cost of material for wrapping candies, depends on the number of candies everyday produced. The quantity of production of candy may vary everyday. Higher the number of candies, higher would be the demand for material for wrapping candies; and thus higher would be cost for purchasing the materials for wrapping candies. So, the costs of material for wrapping candies is a variable cost.

The expenses for an accountant to formulate the tax returns, and the fees to design the candy wrapper, both are one-time costs, which do not depend on the quantity of production. So these two costs are fixed costs.

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