Business Costs Part I

Fixed Costs are...

• costs that do NOT change depending on output.

• Costs that DO change depending on output.

• costs that are always higher than variable costs.

• costs that equal zero with zero output.

Total Revenue =

• Price X Profit

• Price X Variable + fixed costs

• Price X Quantity

• Variable + Fixed Costs

Low barriers to entry and identical products describe what type of market?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Monopoly

A few large firms dominate the market describes what type of market?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Monopoly

Profit =

• Total Revenue - Average Fixed Costs

• Total Revenue - Total Costs

• Total Costs - Variable Costs

• Total Revenue + (VC-FC)

Assume a firm produces 8 units and sells each unit for $4. There ATC is $20 and their AVC is $10. Based on this information what is the firms Fixed Costs?

• FC = $50

• FC = $60

• FC = $80

• FC = $90

What is the variable cost for producing 3 units?

• $11

• $17

• $3

• $15

What is the marginal cost for producing the 5th unit?

• $10

• $13

• $11

• $32

If this firm produces 6 units what are its Total Costs?

• $240

• $180

• $300

• $280

Refer to the graph. To maximize profit this firm should produce

• B units at price J

• A units at price K

• B units at price H

• C units at price H