Question

1. In the short run, which of the following will always be increasing as firm produces more output?

a) average total costs and average variable costs

b) total variable costs

c) total costs and marginal costs

d) average fixed costs

2. What key factor makes healthcare consumption different from most markets?

a) third-party financial intermediaries pay for much of our marginal consumption of health care

b) health care is a good we must consume

c) we have a very elastic demand for health care

d) people only consume health care services when they have to

Answer 1

a) As the firm is increasing the production total variable cost will be always increasing, marginal cost can be falling if the firm is facing an increasing return to scale. the answer is "B".

b) "B"

The demand for this is very inelastic i.e. when we have to consume a healthcare service we need it no matter what.