Chapter 11 Questions 1. A fixed cost: A) will exist only in the long run. B) dep

Question

Chapter 11 Questions 1. A fixed cost: A) will exist only in the long run. B) depends on the level of output C) can be positive, even if the firm doesn't produce any output in the short run decreases until the point of diminishing returns is reached. D) 2. Marginal cost is the: A) increase in total cost when one more unit of output is produced. B) reduction in cost from economies of scale C) ratio of average total cost to total cost. D) increase in output from the addition of one unit of labor Use the following to answer question 10: Figure: The Average Total Cost Curve Average total cost of pair of boots Average total cost, ATC $140 120 100 80 60 P 40 20 0 1 2 3456789 10 Quantity of boots (pairs) 3. (Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. In the figure, the total cost of producing three pairs of boots is approximately: a. $24. b. $72 c. $75. d. $216. 4. Average total cost is: a the change in variable cost divided by the change in quantity. b total cost divided by quantity c the change in quantity divided by the change in labor costs. d total cost times quantity.

Explanation / Answer

Ans1. A fixed cost can b positive

c. even if firm doesnt produces any output in the short run.

Fixed cost is not dependent on the level of output till its limit is reached. It is the cost a firm bears irrespective of whether it has produced anything or not. For ex. factory rent.

Ans2. Marginal cost is

a. Increase in total cost when one more unit of output is produced.

Ans3. The total cost of producing 3 pairs

d. $216.

The graph shows average cost of producing 3 units is $72. Total cost = Avg cost * no of units produced = $72*3 = $216.

Ans4. Average total cost is

b. total cost divided by quantity.

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