Cost Chapter Practice

Average fixed cost

• Fixed cost per unit of output
• Total fixed cost divided by quantity of output produced
• Variable cost per unit of output
• Total cost divided by quantity of output produced

Which of the following cost relationships is not true?

• Average fixed cost is constant at all levels of output.
• Average total cost is the sum of average fixed cost and average variable cost.
• Average variable cost decreases as output increases.
• Average fixed cost increases as output decreases.

When a firm increased its output by one unit, its AFC decreased. This is an indication that

• The firm's average variable cost decreased.
• The firm's fixed cost is spread over a larger number of units.
• The firm's total cost is spread over a larger number of units.
• The firm's variable cost is spread over a larger number of units.

What is the average fixed cost?

• Fixed cost per unit of output

• Total fixed cost divided by quantity of output produced

• Variable cost per unit of output

• Total cost divided by quantity of output produced

Which of the following cost relationships is not true?

• Average fixed cost is constant at all levels of output.

• Average total cost is the sum of average fixed cost and average variable cost.

• Average variable cost decreases as output increases.

• Average fixed cost increases as output decreases.

When a firm increased its output by one unit, its AFC decreased. This is an indication that

• The firm's average variable cost decreased.

• The firm's fixed cost is spread over a larger number of units.

• The firm's total cost is spread over a larger number of units.

• The firm's variable cost is spread over a larger number of units.

What is the average variable cost?

• Fixed cost per unit of output

• Total fixed cost divided by quantity of output produced

• Variable cost per unit of output

• Total cost divided by quantity of output produced

Which of the following cost relationships is true?

• Average fixed cost is constant at all levels of output.

• Average total cost is the sum of average fixed cost and average variable cost.

• Average variable cost decreases as output increases.

• Average fixed cost increases as output decreases.

The relationship between MC and AC can best be described as

• MC is below AC when AC decreases, MC is above AC when AC increases, MC is equal to AC when AC is at its minimum point.
• MC is always above AC
• MC is always below AC
• MC is always equal to AC

When a firm increased its output by one unit, its AC rose from $45 to $50. This implies that its MC is

• $15
• $10
• $20
• $5