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Economics · May / June 2025 · Paper 11 · Question 16

2281Firms’ costs, revenue and objectives

The diagram shows the average total costs (ATC) and average fixed costs (AFC) for a firm. Which statement is correct?

  1. AAt output X, average variable costs are lower than average fixed costs.
  2. BAt output Y, total variable costs are greater than total fixed costs.
  3. CBetween outputs W and Z, total fixed costs are falling.
  4. DBetween outputs W and Y, average variable costs have not changed.

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Correct answer: A. At output X, average variable costs are lower than average fixed costs.

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