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JAMB Economics 2014 Question 41

Question 41

Theory of Costs and Revenue

The short-run average variable cost of a firm will rise owing to

  1. A.an increase in the cost of labour.
  2. B.an increase in the salaries of directors.
  3. C.the expansion of factory space.
  4. D.the building of new warehouses.
Show the answer and explanation

Answer: A (an increase in the cost of labour.)

Explanation

Labour is a variable cost, so higher wages raise average variable cost. Directors' salaries and buildings are fixed costs.