Variable costs are the costs that are directly proportional to the level of output. These costs are low in case of low output and increase with the increase in the quantity of commodity produced (Mankiw G. 2011). For this fishing business, the variable cost elements include the labor costs, the cost of fuel as well as bait, ice and equipment costs. This is because at low output these costs are low and increase gradually with the increase in the quantity produced.
The labor cost per unit curve drops until a minimum of $0.17 with 5000 units produced after which ...