Week 2_8 Effect of a Change in Fixed Cost/Variable Cost

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Get to know Basic Concepts:

-- Fixed costs do not influence the marginal costs so this will NOT influence the output decision – level of profit maximizing output stays the same.

-- A change in the variable costs influences the marginal costs so this will influence the output decision and therefore the level of profit maximizing output will change.

 

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 Question: 

1. Assume the fixed costs increase by $ 5,000 to $ 35,000, what is the effect on the output the firm will produce?

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2. Assume the cost for one unit of labour increase by $ 2000 to $4000, what is the effect on the output the firm will produce?

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Discuss with fellow students in Discussion Forum. 
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Watch the Video:

Play media comment.Play media comment.Download the course slides  Download A

& Download B
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