ABBE1033 Lecture 5 Production and Costs

How is Average Total Cost (ATC) calculated?

• ATC = TC × Q
• ATC = TC ÷ Q
• ATC = TC + Q
• ATC = TC - Q

What is the formula for calculating Marginal Cost (MC)?

• MC = ΔTC ÷ ΔQ
• MC = TC ÷ Q
• MC = ΔTC × ΔQ
• MC = TC - Q

If Total Fixed Costs (TFC) are $1000 and output (Q) is 100 units, what is the Average Fixed Cost (AFC)?

• $10 per unit
• $100 per unit
• $1 per unit
• $1000 per unit

In the short run, which of the following costs remains constant regardless of output?

• Total Variable Costs
• Total Fixed Costs
• Average Variable Costs
• Marginal Costs

What happens to Average Variable Cost (AVC) as output increases in the short run?

• It always decreases
• It always increases
• It first decreases, then increases
• It remains constant

Which of the following best describes a sunk cost?

• A cost that varies with output
• A cost that can be recovered
• A fixed cost that occurs in the future
• A cost incurred in the past that cannot be changed by current decisions

What does the Long-Run Average Total Cost (LRATC) curve represent?

• The total cost of production in the long run
• The marginal cost of production in the long run
• The average cost per unit when all inputs can be adjusted
• The fixed costs in the long run

Which of the following describes economies of scale?

• When inputs increase by some percentage and output increases by a smaller percentage
• When inputs increase by some percentage and output increases by the same percentage
• When inputs increase by some percentage and output increases by a greater percentage
• When inputs decrease and output increases

What happens to LRATC during diseconomies of scale?

• It falls
• It rises
• It remains constant
• It becomes zero

Which of the following is NOT a reason for economies of scale?

• Greater employee specialization
• Efficient mass production techniques
• Improved coordination in large firms
• Lower setup costs per unit of output