IB Economics
Welker
Unit 1.5.1 Costs of Production
Quiz - 20 marks
1. Fill in the blanks in the table below, then answer the questions that follow. Round
numbers to the nearest two decimal points. (4 marks)
Quantity of Total fixed
output
costs
Total
variable
costs
Total costs
Marginal
Cost
Average
variable
cost
Average
total cost
0
4
0
4
1
4
6
___
6
6.00
___
2
4
10
14
4
___
7.00
3
4
___
16
___
4.00
5.33
4
4
16
20
4
___
___
5
4
22
___
6
4.40
5.20
6
4
30
34
___
5.00
5.67
7
4
___
44
10
5.71
6.29
8
4
52
56
12
6.50
___
2. On the graph below, plot the MC, AVC and ATC curves. (4 marks)
3. State the law of diminishing marginal returns and explain how it affects this firm's shortrun costs of production. Refer to figures on your graph in your explanation (4 marks)
4. Explain the relationship in the short run between this firm's marginal costs and its average
variable and average total costs of production (4 points)
5. Identify the following: (4 marks)
a. The average fixed cost of the first unit of output.
b. The average fixed cost of the eighth unit of output.
c. Explain why the average fixed cost falls as output increases.