Clues for P16, Q2b

Clues for Q2b - feel free to circulate

Explain what is meant by average cost (use diagram page 7).

Reasons for similar firms in an industry having similar costs:

1. Same / similar variable costs (i.e. labour and raw materials);
2. Similarly-sized industrial units (MES)

Reasons why they might not face similar costs:

1. Products are often differentiated
2. Firms may operate in different countries
3. Well-established firms may have advantages
4. Some firms may be run better