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JAMB Economics 1997 Question 10

Question 10

Theory of Costs and Revenue

The type of cost which has to be covered for a firm to continue production in the short-run is the

  1. A.overhead cost
  2. B.fixed cost
  3. C.marginal cost
  4. D.average variable cost.
Show the answer and explanation

Answer: D (average variable cost.)

Explanation

In the short run a firm keeps producing as long as price covers average variable cost; fixed costs must be paid whether it produces or not.