#1
Which of the following is a characteristic of a fixed cost?
It remains constant regardless of the level of output.
ExplanationFixed costs do not change with the level of production.
#2
What does the average fixed cost curve look like?
Horizontal
ExplanationAverage fixed cost remains the same regardless of output, resulting in a horizontal curve.
#3
In the short run, a firm's total variable cost (TVC) ________ as output increases.
Increases
ExplanationTotal variable cost rises with higher levels of output in the short run.
#4
What does the average fixed cost (AFC) curve look like?
Horizontal
ExplanationAFC remains constant regardless of output, resulting in a horizontal curve.
#5
Which cost concept represents the cost per unit of output?
Average total cost
ExplanationAverage total cost represents the cost per unit of output produced.
#6
Which of the following is a characteristic of a variable cost?
It varies with the level of output.
ExplanationVariable costs change with the level of production.
#7
What does the average variable cost curve typically look like?
U-shaped
ExplanationAverage variable cost initially decreases, then increases, forming a U-shaped curve.
#8
What does the average total cost (ATC) curve represent?
The total cost per unit of output.
ExplanationAverage total cost represents the cost per unit of output.
#9
What is the relationship between average variable cost (AVC) and marginal cost (MC)?
AVC equals MC.
ExplanationAverage variable cost equals marginal cost at the minimum point of the AVC curve.
#10
Which cost curve becomes steeper as output increases?
Marginal cost curve
ExplanationMarginal cost curve becomes steeper as output increases due to diminishing returns.
#11
What does the total cost (TC) curve represent?
The total cost at a specific level of output.
ExplanationTotal cost curve shows the cumulative cost at different levels of output.
#12
Which cost is not directly accounted for in the short run?
Fixed cost
ExplanationFixed costs cannot be altered in the short run.
#13
What is the relationship between marginal cost and average total cost when marginal cost is below average total cost?
Marginal cost is less than average total cost.
ExplanationWhen marginal cost is below average total cost, average total cost decreases.
#14
What is the formula to calculate average fixed cost?
Total fixed cost / Total output
ExplanationAverage fixed cost is total fixed cost divided by total output.
#15
What is the relationship between marginal cost (MC) and average total cost (ATC) when MC is greater than ATC?
MC is greater than ATC.
ExplanationWhen MC exceeds ATC, ATC rises.
#16
Which of the following is true about economies of scale?
Average total cost decreases as output increases.
ExplanationEconomies of scale occur when average total cost decreases with increased production.
#17
What does the long-run average cost curve (LRAC) depict?
The lowest possible average cost for producing a given level of output in the long run.
ExplanationLRAC illustrates the lowest average cost achievable at each level of output in the long run.
#18
Which of the following represents a diseconomy of scale?
Average total cost increases as output increases.
ExplanationDiseconomies of scale occur when average total cost rises with increased production.
#19
What happens to marginal cost (MC) when average variable cost (AVC) is at its minimum?
MC equals AVC.
ExplanationAt the minimum point of AVC, MC equals AVC.