The total cost of production equals Select one: a. average total cost + average

Question

The total cost of production equals

Select one:

a. average total cost + average variable cost

b. average total cost + average fixed cost

c. average variable cost + average fixed cost

d. total fixed cost + total variable cost

e. marginal cost + total variable cost

If a firms output equals 10, product price equals $5.00, TFC = $8.00, and TVC = $60.00, then the firms profit would equal

Select one:

a. $.80

b. $1.80

c. $80.00

d. -$16.80

e. -$18.00

The difference between variable cost and fixed cost is that

Select one:

a. fixed cost is paid even when there is no output

b. fixed cost is always falling as output increases

c. variable cost only increases for a while and then it decreases

d. fixed cost is always less than variable cost

e. fixed cost is not paid once production begins

A local bagel company plans to keep and maintain its bagel factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period

Select one:

a. are short-run decisions

b. are long-run decisions

c. involve only maintenance of the factory

d. are zero, since the cost decisions were made at the beginning

e. involve both fixed and variable cost

Total cost divided by quantity of output is

Select one:

a. average variable cost

b. average total cost

c. average fixed cost

d. marginal cost

e. total variable cost

Explanation / Answer

1. Total cost of production is the sum of the fixed costs and the variable costs.

Thus, correct choice is d. Total Fixed cost + Total variable cost

2.
Total costs = Total Fixed cost + Total Variable cost = $68
Revenue from selling 10 units at $5 = 10*5 = 50

Profit = Revenue - Costs = 50 - 68 = -18

thus,correct choice is e. -$18

3. Fixed costs are the machinery,equipment, building costs which are incurred whether or not there is any output.

Thus, correct choice is a. Fixed cost is paid even when there is no output

4. In the short run, the size of the factory is fixed, while in the long run, the firm can decide to increase or decrease the size of the factory, exit or enter an industry etc. As given in the question, the factory is fixed for 25 years.
Thus, correct choice is a. Are short-run decisions

5. Total cost divided by quantity of output is the average total cost

thus, choice b. Average total cost.

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