1. (a) Complete the following table of output and associated costs to two decimal
places (7 marks).:
Output (units per period)
Total Cost (£)
Marginal Cost (£)
Average Cost (£)
10
50
-
?
11
65
?
?
12
68
?
?
13
80
?
?
b. If the average cost of producing 14 units per period was £7, what was the marginal cost of
the 14th unit? (3 marks)
2. The following expression shows the demand equation for a product: QD = 520 - 5P,
where P is the product's unit price in £:
a. Calculate the total revenue when the price is £8 per unit and also when the price is
£9 per unit. (2 marks)
b. What does the result say about the price elasticity of demand between the two
prices? (1 mark)
c. Calculate the price elasticity of demand when P increases from £8 to £9. (5 marks)
d. Is demand price elastic or inelastic at this point and does this confirm what you
expected in (b)? (2 marks)
Question
If a firm employs 10% more labour and 10% more capital in its production process than it
did before and experiences a 20% increase in output, then what will happen to the average
cost per unit of output?
Group of answer choices
It will increase.
It will remain unchanged.
It will decrease.
Cannot be determined from the information given in the question.