Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can tell a fixed cost from a variable cost with an example of each, and explain why TFC is paid even at zero output. (Guide: “Fixed and variable costs”; Practice Q4(a))
- I can explain why AFC falls at every output. (Guide: “Why the cost curves have their shapes”; Practice Q3)
- I can explain why MC falls at first (specialisation and the division of labour) and then rises (diminishing marginal returns). (Guide: Worked example 2; Practice Q6)
- I can explain why MC cuts AVC and ATC at their minimum points. (Guide: “Why the cost curves have their shapes”; Practice Q3, Q4(d))
Calculation and graphing
- I can find TFC from a total cost table and calculate TVC, MC, AFC, AVC and ATC at each output. (Guide: Worked example 1; Practice Q1, Q4)
- I can calculate marginal cost from production data using MC = wage ÷ MP. (Guide: Worked example 2; Practice Q6)
- I can use ATC = AFC + AVC to find a missing cost or TFC. (Practice Q7)
- I can draw TFC, TVC and TC, with TC parallel to TVC and starting at TFC. (Guide: Figure 1)
- I can draw labelled MC, ATC, AVC and AFC curves with the minimum of ATC to the right of the minimum of AVC. (Guide: Figure 2; Practice Q5)
Reasoning
- I can say which cost curves shift when a fixed cost, a variable input price or productivity changes. (Guide: “What shifts the cost curves”; Practice Q2, Q5, Q6(d))
- I can explain why a change in fixed cost never changes marginal cost. (Guide: Worked example 1(c); Practice Q2)
- I can evaluate the claim that producing more always lowers average total cost. (Guide: “Common misconceptions”; Practice Q7)
All ticked? Move on to Topic 3.3, Long-Run Production Costs, or return to the course roadmap.