Most of the candidates did not attempt this question. The few that attempted it scored very low marks. Generally, candidates found it difficult to interpret and compute values from the graph. In order to score high marks in this question, candidates were expected to present their answers thus:
(a) i) Variable Cost = Total cost – fixed cost
At output 2 units = $140 -$50 = $90
‘ ‘ 4 units = $220 -$50 = $170
‘ ‘ 6 units = $290 -$50 = $240
‘ ‘ 8 units = $350 -$50 = $300
(ii) Average Cost = TC
Q
At output 4 units = 220 = $55
4
At output 6 units = 290 = $48.33
6
At output 8 units = 350 = $43.75
8
(iii) Marginal Cost = TCn - TCn-1
At output 4 units $220 -$200 = $20
At output 6 units $290 -$260 = $30
OR
Marginal Cost = ΔTC
ΔQ
MC4 = $220 - $200
4 – 3
= $20 = $20
1
MC6 = $290 - $260 = $30 = $30
6 – 5 1
Average fixed cost = FC OR FC
Output Q
At output 4 units = $50 = $12.5
4
At output 6 units = $50 = $8.33
6
At output 8 units = $50 = $6.25
8
