Economists Do It With Models

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Practice Problem of the Day, 10/18/2013

October 18th, 2013 · 2 Comments
Practice Problem of the Day

This video shows how to calculate various forms of cost (total fixed cost, total variable cost, average variable cost, average total cost, average fixed cost, and marginal cost) based on total cost information and shows graphically what these costs look like. The problem is taken from Essentials of Economics, 2nd Edition, by Paul Krugman, Robin Wells, and Kathryn Graddy, and is Ch. 6 problem #4.

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Tags: Practice Problem of the Day

2 responses so far ↓

  • 1 Dave // Oct 20, 2013 at 11:01 am

    Just a suggestion. I think you could make the point without going into the drudgery of each calculation. This would allow you to spend more time on the significance of the idea the graph is trying to get the students to consider.

  • 2 AWB // Oct 21, 2013 at 1:52 pm

    Thanks for posting this. Very helpful and the walkthrough the calculations is great.

    As a side note, it’s good to know that fixed and variable costs only reflect business activity. Marginal cost, taxes and less tangible opportunity costs will also weigh in on a company’s expenses in addition to earnings.

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