Fixed and Variable Costs

Assume that the fixed cost is $50. Based on the cost and output data in the table, what is the marginal cost when the firm increases its output from three to four units AND the average total cost of producing 4 units (respectively)?

• MC=$35; ATC=$40

• MC=$35; ATC=$35

• MC=$25; ATC=$35

• MC=$25; ATC=$25

If a new tax on capital increases a firm’s fixed cost of production, which of the following will occur in the short run?

• Average total cost will increase

• Marginal cost will increase

• Average variable cost will increase

• The profit-maximizing level of output will increase

In which category should you have to make the most cuts in the budget?

• Savings

• Variable/Flexible Expenses

• Fixed Expenses

• Emergency Fund

Which of the following costs is; Groceries

• Fixed Cost

• Variable/ Flexible Cost

• Discretionary Cost

In order to control his budget, Josh should cut spending in which of the following categories?

• Food/Entertainment

• Rent/Mortgage

• Savings/Emergency Fund

• Car/Insurance

Which of the following costs is; car insurance

• Fixed Cost

• Variable/ Flexible Cost

• Discretionary Cost

Which of the following is an example of a fixed cost for a business?

• Rent for office space

• Cost of raw materials

• Wages for hourly workers

• Utility bills

Variable costs change with the level of production. Which of the following is a variable cost?

• Salaries of permanent staff

• Lease payments

• Cost of raw materials

• Insurance premiums

In the context of a bakery, which cost would be considered a fixed cost?

• Flour and sugar

• Baker's salary

• Electricity bill

• Rent for the bakery

A company experiences an increase in production. Which cost is most likely to increase?

• Fixed cost

• Variable cost

• Depreciation

• Interest on loans