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DragIT - variable cost curve

In the simulation below, drag the slider to see the impact of changes in variable cost per unit on the variable cost curve. N.B. Please note that this is a variable cost curve with no diminishing returns to the variable factor.

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question

1
Variable costs

An increase in raw material costs will shift the variable cost curve upwards.

a)
b)
That's correct. The statement is true. Raw materials are part of a company's variable costs, so an increase in raw material costs will shift the variable cost curve upwards.That's not right. The statement is true. Raw materials are part of a company's variable costs, so an increase in raw material costs will shift the variable cost curve upwards.Your answer has been saved.
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2
Variable cost changes

Which of the following will lead to the variable cost curve shifting downwards?

a)
b)
c)
d)
Yes, that's correct. Rents and software licences will generally be considered fixed costs and so not affect the variable cost curve. A reduction in energy prices will reduce production (and thus variable) costs.No that's not right. Rents and software licences will generally be considered fixed costs and so not affect the variable cost curve. A reduction in energy prices will reduce production (and thus variable) costs.Your answer has been saved.
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