Question

Question 3 (Mandatory) (1 point) Which of the following statements is false? a) Changes in variable costs are reflected dollar-for-dollar in changes in total cost. b) Fixed costs exist in the short run, but not in the long run. c) Marginal cost is the cost of producing an additional unit of output. d) Since (total) fixed costs are constant as output changes in the short run, it follows that average fi- constant in the short run. Question 4 (Mandatory) (1 point) Saved The demand curve facing a perfectly competitive firm

Answer 1

Since total fixed cost are constant as output changes in the short run, it follows that average fixed cost remains constant in the short run. The given statement is false.

Reason: average fixed cost equals total fixed cost at each level of output divided by the number of units produced.

AFC = TFC/Q

The average fixed cost diminish continuously as output increases. This is natural because when a constant figure, total fixed cost a divided by continuously increasing unit of output, the result is continuously diminishing average fixed cost. Thus the average fixed cost curve is a downward sloping curve which approaches the quantity Axis without touching it. It is a rectangular hyperbola.