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5 marksTheory of Supply

CAPE Economics Unit 1 · 2014 · Paper 2 · Question 3(b)(i)

With the aid of an example, explain the relationship between the marginal cost curve and the average cost curve.

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Other parts of this question

  1. 3(a)(i)Copy and complete the table to show marginal cost and average cost for each level of output.[7 marks]
  2. 3(a)(ii)Use the completed table from (a)(i) to plot marginal cost, marginal revenue, and average cost curves on the same diagram.[5 marks]
  3. 3(b)(ii)Identify the market structure under which the firm operates, justifying your answer.[3 marks]
  4. 3(c)Analyse how a specific characteristic of perfect competition guarantees that, in the long run, perfectly competitive firms earn zero economic profits.[5 marks]

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