Production Costs

Which of the following would be an example of a fixed cost on a farm?

• Mortgage on the land

• Cost of seed

• Fuel to operate machinery

• Fertilizer

To increase marginal return, a company might consider

• stopping production

• purchasing more machinery

• increasing output

• reducing output

In general, it is a bad move for a company to produce more of a good or service if, by doing so

• marginal cost exceeds marginal revenue

• variable costs exceed fixed costs

• demand exceeds supply

• fixed costs exceed marginal revenue

In determining the optimal level of output, a firm should aim for the

• point where decreasing returns become negative returns

• output level where fixed costs exceed variable costs

• point of maximum profitability for the company

• output level where marginal returns are still increasing

In which of the following situations would a business be wise to shut its factory?

• When revenue exceeds variable costs

• When marginal costs exceed fixed costs

• When fixed costs exceed revenue

• When total costs exceed marginal costs