AP Microeconomics · Past multiple choice · Question 21, older AP Economics course description · Four-function calculator
Variable cost at five units
From the same table, find the variable cost of making five units.
The lesson this question tests
1 Read the question
The question is College Board's: sample question 21 in AP Economics Course Description. It starts on page 22 of the PDF. College Board no longer posts this edition, so it opens from the copy the Internet Archive saved on June 3, 2016. A four-function calculator is allowed, as on the exam.
Open Question 21 (PDF, page 22)
2 Pick your answer
3 Check the explanation
Why the answer is C open once you have picked
Total cost is fixed cost plus variable cost. Fixed cost is whatever the firm pays even when it produces nothing, so read it off the row for zero output: $13.
At 5 units total cost is $43. Taking out the fixed cost leaves the variable cost: 43 - 13 = $30.
Each choice
- A. This divides the variable cost by the 5 units, giving average variable cost. The question asks for total variable cost.
- B. This is the marginal cost of the fifth unit, $43 - $32. It is the cost of only the last unit, not of all five.
- C (correct). Fixed cost is total cost at zero output, so variable cost at five units is $43 minus $13.
- D. This is total cost, which still includes the $13 of fixed cost.
- E. The row for zero output gives the fixed cost, and that is enough to separate variable cost from total cost.
Question and answer key: College Board, from the Internet Archive. The title and summary are ours, and so is the explanation.