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4 marksTheory of Supply

CAPE Economics Unit 1 · 2005 · Paper 2 · Question 1(e)(ii)

Explain how increasing levels of output affect costs.

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Other parts of this question

  1. 1(a)Copy and complete the table for APP, MPP, AVC, and MC.[12 marks]
  2. 1(b)(i)Define Average Physical Product (APP) OR provide the formula for calculating it.[2 marks]
  3. 1(b)(ii)Define Marginal Physical Product (MPP) OR provide the formula for calculating it.[2 marks]
  4. 1(b)(iii)Define Average Variable Cost (AVC) OR provide the formula for calculating it.[2 marks]
  5. 1(b)(iv)Define Marginal Cost (MC) OR provide the formula for calculating it.[2 marks]
  6. 1(c)State what happens to average physical product (APP) and marginal physical product (MPP) as output increases.[2 marks]
  7. 1(d)State what happens to average variable cost (AVC) and marginal cost (MC) as output increases.[2 marks]
  8. 1(e)(i)Explain how output will be affected when a variable input is added to a fixed input.[4 marks]
  9. 1(f)Draw a diagram showing the marginal cost curve (MC) and the price ($200) of the product.[12 marks]
  10. 1(g)Identify what level of output the firm will produce and state how you arrived at your answer.[6 marks]

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