#1
Which of the following is a fixed cost?
Rent for factory space
ExplanationFixed costs remain constant.
#2
What does the average variable cost (AVC) represent?
Total variable cost divided by the quantity of output
ExplanationAVC represents the cost per unit of output in the short run.
#3
Which of the following represents the formula for total cost (TC)?
TC = FC + VC
ExplanationTotal cost is the sum of fixed and variable costs.
#4
What is the formula for average fixed cost (AFC)?
AFC = FC / Q
ExplanationAFC is the fixed cost per unit of output.
#5
What is the formula for marginal cost (MC)?
MC = ΔTC / ΔQ
ExplanationMC represents the change in total cost per change in quantity.
#6
What is the relationship between marginal cost (MC) and average total cost (ATC) at the minimum point of ATC?
MC = ATC
ExplanationAt the minimum point of ATC, MC equals ATC.
#7
In the short run, what happens to fixed costs as output increases?
Fixed costs remain constant
ExplanationFixed costs do not change with variations in output.
#8
What is the shape of the average variable cost (AVC) curve in the short run?
U-shaped
ExplanationAVC curve exhibits a U-shape due to diminishing returns.
#9
What does the marginal cost (MC) curve intersect on the average variable cost (AVC) curve at its minimum point?
At the AVC curve's minimum point
ExplanationMC equals AVC at the minimum point of the AVC curve.
#10
What is the relationship between marginal cost (MC) and average total cost (ATC) when MC is below ATC?
MC < ATC
ExplanationMC is less than ATC when MC is below ATC.
#11
Economic profit differs from accounting profit because it accounts for which of the following?
Both explicit and implicit costs
ExplanationEconomic profit considers all costs, including implicit costs.
#12
What happens to economic profit when accounting profit is positive and explicit costs are greater than implicit costs?
Economic profit is negative
ExplanationNegative economic profit indicates losses despite positive accounting profit.
#13
What does a negative economic profit indicate?
Losses are being incurred
ExplanationNegative economic profit signals financial losses.
#14
What does it mean if economic profit is zero?
Total revenue equals total costs
ExplanationZero economic profit implies break-even point.
#15
What happens to economic profit when accounting profit is positive and implicit costs are greater than explicit costs?
Economic profit is negative
ExplanationNegative economic profit results from greater implicit costs than explicit costs.