WAEC Economics 2025 Theory — Question 5

Model answer

(a) Production cost is the total amount spent on raw materials, labour and other expenses incurred in producing a particular commodity. (b) Real cost is the opportunity cost of producing a commodity - for example, if a producer could make either a book or a biro and chooses to produce the biro, the real cost is the book forgone. Explicit cost is the actual monetary expense incurred in production - for example, all the money spent in producing the biro. (c) Fixed input is an input whose quantity does not vary with the level of output, e.g. a factory building. Variable input is an input whose quantity varies as output varies, e.g. labour and raw materials. (d) Types of short-run cost: (i) Fixed cost - does not vary with output; (ii) Variable cost - varies with output, rising as output rises and vice versa; (iii) Total cost - the sum of fixed cost and variable cost; (iv) Average cost - the cost per unit of output.