Question

28. If one knows total costs for all levels of output, including zero output, t is possible to calculate: a. b. c. AFC AVC ATC MC e. all of the above 29. Which of the following holds true? there is no relationship between AP and AVC when MP rises AFC falls, and when MP falls AFC rises when AP rises AVC falls, and when AP falls AVC rises when AP rises AVC rises, and when AP falls AVC falls a. b. d. 30. a. AP increases When MP is greater than AP, we know that: b. c. d. AP falls AP is at maximum none of the above 31. If MC goes down, it means that: a. MP is at maximum b. MP is at minimum MP is falling d. MP is rising

Answer 1

28. If the total costs are known, we can calculate

Average Fixed Cost (AFC): The total cost at zero level of output is the fixed cost. By dividing it with the quantity of output, we get the Average fixed Cost.

Average Variable Cost (AVC): Subtract the Fixed cost from total cost in each level of output to get the Total variable cost. Divide it by quantity of output and get the Average Variable Cost.

Average Total Cost (ATC): Divide the total cost quantity of output.

Marginal Cost (MC): The cost of additional unit of output.

Hence the correct option is e. All of the above

29. Correct option: d. When AP rises, AVC rises, when AP falls, AVC falls.

30. Correct option: a. AP increases.

31. Correct option: d. MP is rising. (MP and MC have an inverse relationship)