Types of cost, revenue and profit, short-run and long-run production
7.5What the syllabus asks of you
- short-run production function: fixed and variable factors of production
- short-run production function: definition and calculation of total product, average product and marginal product
- short-run production function: law of diminishing returns (law of variable proportions)
- short-run cost function: definition and calculation of fixed costs (FC) and variable costs (VC)
- short-run cost function: definition and calculation of total, average and marginal costs (TC, AC, MC), including average total cost (ATC), total and average fixed costs (TFC, AFC) and total and average variable costs (TVC, AVC)
- short-run cost function: explanation of shape of short-run average cost and marginal cost curves
- long-run production function: no fixed factors of production
- long-run production function: returns to scale
- long-run cost function: explanation of shape of long-run average cost curve
- long-run cost function: concept of minimum efficient scale
- relationship between economies of scale and decreasing average costs
- internal and external economies of scale
- internal and external diseconomies of scale
- definition and calculation of revenue: total, average and marginal revenue (TR, AR, MR)
- definition of normal, subnormal and supernormal profit
- calculation of supernormal and subnormal profit
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Every question on Types of cost, revenue and profit, short-run and long-run production, untimed, marked as you go.
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47 questions
1May / June 2026 · Paper 31 · Q5Show mark scheme →
Afixed costs: decreased; variable costs: decreased
Bfixed costs: decreased; variable costs: increased
Cfixed costs: increased; variable costs: decreased
Dfixed costs: increased; variable costs: increased
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2May / June 2026 · Paper 32 · Q3Show mark scheme →
AIt falls to C2.
BIt falls to C3.
CIt falls to C4.
DIt is unchanged at C1.
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3May / June 2026 · Paper 33 · Q5Show mark scheme →
Afixed costs: decreased; variable costs: decreased
Bfixed costs: decreased; variable costs: increased
Cfixed costs: increased; variable costs: decreased
Dfixed costs: increased; variable costs: increased
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4May / June 2026 · Paper 34 · Q3Show mark scheme →
Afixed cost only
Bfixed cost and variable cost
Cvariable cost only
Dvariable cost and total cost
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5May / June 2026 · Paper 34 · Q6Show mark scheme →
Adecreased number of firms; decreased concentration ratio
Bdecreased number of firms; increased concentration ratio
Cincreased number of firms; decreased concentration ratio
Dincreased number of firms; increased concentration ratio
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6Oct / Nov 2025 · Paper 31 · Q2Show mark scheme →
AThe new airline can negotiate discounts when buying fuel.
BThe new airline has many layers of management.
CThe new airline is unable to hire enough pilots.
DThe workforce of the new airline lacks morale and is demotivated.
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7Oct / Nov 2025 · Paper 33 · Q4Show mark scheme →
AA
BB
CC
DD
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8Oct / Nov 2025 · Paper 33 · Q6Show mark scheme →
A$2.00
B$4.00
C$6.00
D$8.00
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9Oct / Nov 2025 · Paper 33 · Q7Show mark scheme →
AOW
BOX
COY
DOZ
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10Oct / Nov 2025 · Paper 34 · Q5Show mark scheme →
Aaverage fixed cost
Baverage total cost
Caverage variable cost
Dmarginal cost
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11May / June 2025 · Paper 31 · Q5Show mark scheme →
Aefficient local transport networks
Bimproved access to spare parts as a result of industry growth
Clower risks from supplying a wider range of customers
Dthe training of skilled labour at a college financed by local firms
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12May / June 2025 · Paper 32 · Q5Show mark scheme →
ADiagram A: U-shaped SRAC curve
BDiagram B: upward-sloping SRAC curve
CDiagram C: U-shaped LRAC curve
DDiagram D: downward-sloping LRAC curve
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13May / June 2025 · Paper 33 · Q5Show mark scheme →
Aefficient local transport networks
Bimproved access to spare parts as a result of industry growth
Clower risks from supplying a wider range of customers
Dthe training of skilled labour at a college financed by local firms
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14Feb / March 2025 · Paper 32 · Q1Show mark scheme →
Aaverage cost
Baverage fixed cost
Caverage variable cost
Dmarginal cost
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15Oct / Nov 2024 · Paper 31 · Q4Show mark scheme →
Aa decrease in total fixed cost
Bincreasing returns to scale
Cinternal diseconomies of scale
Dmore than one factor of production is variable
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16Oct / Nov 2024 · Paper 31 · Q7Show mark scheme →
A$20
B$40
C$50
D$60
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17Oct / Nov 2024 · Paper 31 · Q14Show mark scheme →
Awhen the second worker is employed
Bwhen the third worker is employed
Cwhen the fourth worker is employed
Dwhen the fifth worker is employed
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18Oct / Nov 2024 · Paper 32 · Q3Show mark scheme →
Afalling returns to scale | average cost is greater than marginal cost
Bfalling returns to scale | rising returns to scale
Cunit cost falls as output increases | falling average fixed costs
Dunit cost falls as output increases | unit cost rises as output increases
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19Oct / Nov 2024 · Paper 32 · Q6Show mark scheme →
Aprice rise, output fall, profit rise
Bprice rise, output fall, profit fall
Cprice unchanged, output rise, profit rise
Dprice unchanged, output unchanged, profit fall
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20Oct / Nov 2024 · Paper 33 · Q4Show mark scheme →
A–15
B10
C30
D120
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21Oct / Nov 2024 · Paper 33 · Q8Show mark scheme →
Acheaper costs from purchasing large quantities of inputs
Bdecreased interest rates on borrowed funds
Cincreased labour productivity
Drelevant training facilities at a local college
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22May / June 2024 · Paper 32 · Q4Show mark scheme →
AMC fall then rise; ATC fall then rise; AFC fall
BMC fall then rise; ATC rise then fall; AFC rise
CMC rise then fall; ATC fall then rise; AFC fall
DMC rise then fall; ATC rise then fall; AFC rise
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23Feb / March 2024 · Paper 32 · Q4Show mark scheme →
Ademand | labour | returns to scale
Bdemand | labour | normal profit
Coutput | inputs | returns to scale
Doutput | inputs | supernormal profit
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24Oct / Nov 2023 · Paper 31 · Q4Show mark scheme →
AAverage fixed costs are falling.
BEconomies of scale are being experienced.
CThe law of diminishing returns is operative.
DThere are decreasing returns to scale.
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25Oct / Nov 2023 · Paper 33 · Q4Show mark scheme →
AAverage fixed cost falls.
BAverage fixed cost is constant.
CAverage variable cost falls.
DAverage variable cost rises.
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26May / June 2023 · Paper 31 · Q7Show mark scheme →
AAverage variable cost is constant.
BAverage variable cost is falling.
CAverage variable cost is greater than its average total cost.
DAverage variable cost is rising.
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27May / June 2023 · Paper 32 · Q11Show mark scheme →
Aaverage costs decrease; marginal costs decrease
Baverage costs decrease; marginal costs increase
Caverage costs increase; marginal costs decrease
Daverage costs increase; marginal costs increase
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28May / June 2023 · Paper 32 · Q14Show mark scheme →
A6.0 units
B6.5 units
C7.0 units
D8.0 units
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29May / June 2023 · Paper 33 · Q7Show mark scheme →
AAverage variable cost is constant.
BAverage variable cost is falling.
CAverage variable cost is greater than its average total cost.
DAverage variable cost is rising.
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30Feb / March 2023 · Paper 12 · Q2Show mark scheme →
Athe time period when all factors of production are specialised
Bthe time period when all factors of production are variable
Cthe time period when all key inputs into production are variable
Dthe time period when at least one factor of production is fixed
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31Oct / Nov 2022 · Paper 31 · Q11Show mark scheme →
Aincreasing its fixed factors of production only
Bincreasing its fixed and variable factors of production
Creducing its fixed factors of production only
Dreducing its fixed and variable factors of production
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32Oct / Nov 2022 · Paper 32 · Q8Show mark scheme →
AWhen each of the three SRAC curves is U-shaped it shows the existence of economies of scale.
BWhen the LRAC curve is upward-sloping beyond output OQ it shows the existence of diseconomies of scale.
CWhen the minimum point of SRAC2 is below that of SRAC1 it shows the existence of the law of variable proportions.
DWhen the minimum point of SRAC2 is below that of SRAC3 it shows the existence of economies of scale.
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33Oct / Nov 2022 · Paper 32 · Q10Show mark scheme →
A$1m
B$6m
C$10m
D$30m
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34Oct / Nov 2022 · Paper 32 · Q22Show mark scheme →
Adecreases it by 1 unit
Bdecreases it by 40 units
Cincreases it by 120 units
Dincreases it by 1200 units
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35Oct / Nov 2022 · Paper 33 · Q9Show mark scheme →
Aaverage fixed cost curve.
Baverage variable cost curve.
Cmarginal revenue curve.
Dtotal cost curve.
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36Oct / Nov 2022 · Paper 33 · Q10Show mark scheme →
Athe extra revenue received from the sale of a farmer's land to a house-building firm
Bthe extra revenue received by a firm from an unexpectedly large increase in demand
Cthe total revenue from the sale of a firm's products in excess of the total variable costs of the firm
Dthe total revenue in excess of total costs of the firm above the minimum needed to keep the firm in business in the long run
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37Oct / Nov 2022 · Paper 33 · Q11Show mark scheme →
AW to Y | X to W | Z to W
BW to Y | Y to W | Z to W
CX to Y | W to Z | W to Y
DX to Y | Y to X | W to Y
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38Feb / March 2022 · Paper 32 · Q16Show mark scheme →
ADiagram A
BDiagram B
CDiagram C
DDiagram D
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39Oct / Nov 2021 · Paper 31 · Q8Show mark scheme →
AIt is horizontal.
BIt is 'U' shaped.
CIt slopes downwards.
DIt slopes upwards.
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40Oct / Nov 2021 · Paper 32 · Q6Show mark scheme →
AAC = TC/MC, AR = TR/MR
BAC = TC/P, AR = P × Q
CAC = TC/Q, AR = TR/Q
DAC = TC/Q, AR = TR/P
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41Oct / Nov 2021 · Paper 33 · Q8Show mark scheme →
Aaverage cost: falls; marginal cost: falls
Baverage cost: falls; marginal cost: rises
Caverage cost: rises; marginal cost: falls
Daverage cost: rises; marginal cost: rises
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42Oct / Nov 2021 · Paper 33 · Q16Show mark scheme →
AIt stops increasing.
BIt increases at a constant rate.
CIt increases at a falling rate.
DIt increases at a rising rate.
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43May / June 2021 · Paper 31 · Q10Show mark scheme →
AAverage total cost is minimised at output OQ2.
BAverage variable cost is minimised at output OQ1.
CAverage variable cost is minimised at output OQ3.
DMarginal cost is minimised at output OQ1.
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44May / June 2021 · Paper 32 · Q8Show mark scheme →
AWhen the minimum point of SRAC3 is lower than the minimum point of SRAC2 it reflects the law of variable proportions.
BThe law of diminishing returns explains why each of the SRAC curves is U-shaped.
CThe position of SRAC2 shows the minimum efficient scale of production.
DThe rising section of SRAC1 indicates the existence of diseconomies of scale.
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45May / June 2021 · Paper 33 · Q10Show mark scheme →
AAverage total cost is minimised at output OQ2.
BAverage variable cost is minimised at output OQ1.
CAverage variable cost is minimised at output OQ3.
DMarginal cost is minimised at output OQ1.
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46Feb / March 2021 · Paper 32 · Q6Show mark scheme →
AAverage total cost is minimised at output OQ3.
BAverage variable cost is minimised at output OQ2.
CAverage variable cost is minimised at output OQ3.
DMarginal cost is minimised at output OQ1.
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47Feb / March 2021 · Paper 32 · Q8Show mark scheme →
AAverage fixed cost first falls and then, beyond some point, rises.
BAverage variable cost increases as soon as the law of diminishing marginal returns begins to operate.
CThe minimum point of the average total cost curve occurs at a greater level of output than the minimum point of the average variable cost curve.
DWhen marginal cost reaches its minimum point, average variable cost must be greater than average fixed cost.
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