Production Costs

When marginal cost is below average cost

• average cost will be rising

• average cost will be falling

• marginal cost will be negative

• average cost will be the same as maginal cost

Which of the following statement is NOT true of a firm's variable cost?

• Total variable cost is zero when output is zero.

• Variable costs are subject to change as a firm's output rises

• Total variable cost always rises by a constant amount

• Total variable cost rises as output rises.

When Marginal Cost > Average Total Cost

• ATC will be pulled down

• ATC will most likely be at its lowest value

• ATC will be pulled up

• MC will be pulled down

In the SHORT RUN, what is true?

• AVC always declines as output is expanded

• Variable cost will exceed total cost

• Increases in output will eventually diminish as more inputs are used

• All inputs are variable

Variable Cost/Quantity = _______

• Marginal Variable Cost
• Average Fixed Cost
• Average Variable Cost
• Marginal Total Cost

If a firm does not produce any output, its total cost is equal to

• Zero

• Its fixed costs

• Its variable costs

• Its marginal cost

Additional cost associated with producing one additional unit of output:

• Fixed Costs

• Average Costs

• Marginal Costs

• Emplicit Costs

The shape of a firm's production function in the short run is primarily explained by

• The Law of Increasing Costs

• The spreading effect on average fixed cost

• The diminishing availability of inputs

• Diminishing marginal returns

Total Costs / Quantity = _____

• Marginal Cost
• Average Total Cost
• Implicit Cost
• Explicit Cost

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