Production Cost

In the long run...

• All inputs are fixed

• All input are variable

• at least one input is variable and one input is fixes

• at most one input is variable and one input is fixed

Which of the following is NOT considered as variable input?

• A. Worker

• A. Building

• A. Raw materials

• A. Operation manager

A firm experiences decreasing marginal return only when

• Stage 1

• Stage 2

• Stage 3

• Stage 4

At the level of 5 labors, average production is __________.

• 4 units

• 6 units

• 7 units

• 8 units

The marginal production from 3 to 4 labors is _________.

• 2

• 7

• 4

• 8

The output maximum is at labor of _______________

• 3 labors

• 4 labors

• 5 labors

• 6 labors

At Stage 1 of production, a rational producer _________.

• will stop the production

• will reduce the usage of labors

• will continue to increase the number of labors

• will stay the current combination of machine and labors.

Average variable cost (AVC) is

• Explicit costs

• Variable cost divided by output

• The increase in output that arises from an additional unit of input

• Costs that do not vary with the quantity of output produced

What does marginal cost (MC) tell us?

• Is cost from fixed input

• Is variable cost

• The increase in output that arises from an additional unit of input

• The increase in total cost that arises from producing an additional unit of output

Variable cost is

• Long run ATC stays the same as the quantity of output changes

• Fixed + variable cost

• Costs that vary with the output (Q) produced

• An explicit cost