Question

1.

Which of the following must be true when average total cost is decreasing?

		Average fixed cost is increasing.
		Average variable cost is constant.
		Marginal cost is lower than avergae total cost.
		Marginal cost is decreasing.

2.

Which of the following is true?

		AVC=ATC+AFC.
		AFC will go up in the beginning but will eventually go down.
		MC= (change in TC)/ (change in Q)
		FC+MC=TC.

3. Which of the following is true?

		Average product (AP) is increasing when the marginal product (MP) is greater than average product.
		Typically, marginal product goes down and eventually goes up.
		marginal product = (change is TC)/(change in Q)
		All of the above.

4. In the long run, economies of scale is a stage where

		Long-run ATC goes down as quantity increases.
		Long-run ATC remains constant as quantity increases.
		Long-run ATC rises as quantity increases.

Answer 1

Insi): Marginal cast is lower than average total cost Explanation : When .MCZ ATC, ATC is decreasing Cost, • Mc. MC ATC ATC 0 Output MCRATC & ATC is ATC <MCI ATC is falling using In Q (Aus2) MC = Change in to Change Explanation : Me is the change in total cost due to change It is the slope of To clave on output (ehess) Average product is increasing when marginal product is greater than average pendent APIMP CAP MP -> • Input AP is inueasing & АР КИР (Shuswer 4) hong щм АТС down as goes quantity in ceases Explanation ! Economies of scale results into spreading of units fixed costs over large number of of output. This output rises. will cause LATO to fall Cost of falling LATC Upto OQ, units output, we can ewnomies scale. enjoy of Output - Scanned with CamScanner CS Scanned with CamScanner