DP Economics Questionbank

Using the data in Table 1 to support your answer, identify how changes in inputs may result in constant returns to scale and in decreasing returns to scale.

Explain the relationship between the law of diminishing returns and a firm’s short-run cost curves.

Calculate the average fixed cost per ticket if all tickets are sold.

Sketch the marginal product (MP) and average product (AP) curves for this firm.

Sketch the total product (TP) curve for this firm.

Using the figures provided in Table 1, calculate the monthly level of profits Firm A is making at the current level of output, Q’.

Using the relationship P = AR > MR > AC > MC and/or figures provided in Table 1:

Describe how average cost will be affected if Firm A increases its level of output.

Define the term variable costs indicated in bold in the text (paragraph [7]).

Using an average costs diagram, explain the short-run consequence for shrimp farmers if the price received “is not enough to cover their variable costs” (paragraph [7]).

Define the term marginal cost indicated in bold in the text (paragraph 4).

Calculate Firm A’s average fixed costs when it is producing 125 cartons of coffee per month.

Calculate Firm A’s average variable costs when it is producing 125 cartons of coffee per month.

Using Figure 2, calculate the average fixed costs when 80 cans per month are produced.

Using Figure 2, calculate the total costs when 55 cans per month are produced.

Define the term variable costs indicated in bold in the text (paragraph [4]).

Using a fully labelled diagram, outline the relationship between marginal product (MP) and average product (AP) of labour.

Using information from Figure 1, calculate Firm A’s total fixed costs.

Calculate the firm’s total variable costs if output is 20 000 widgets per month.

Calculate the firm’s monthly total fixed costs if output equals 50 000 units per month.

Define the term increasing returns to scale.

Using the data in Table 1 to support your answer, identify how changes in inputs may result in constant returns to scale and in decreasing returns to scale.

Explain two factors that might give rise to economies of scale for a firm.

Define the term economies of scale indicated in bold in the text (paragraph [3]).

Explain the reasons for the shape of the long-run average total cost curve.

Explain how two types of economies of scale can lead to a fall in long-run average costs.

Using a costs diagram, explain how the expansion of the coconut industry could lead to economies of scale (paragraph [4]).

Explain the reasons for the shape of the long-run average total cost curve.