6. If the total cost (TC) of producing computers (Q) is given as: TC 200+5Q then

Question

6. If the total cost (TC) of producing computers (Q) is given as: TC 200+5Q then marginal cost is 5Q 7. Assume that a firm spends S500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be 4/5. 8. Economies of scale cause increasing returns to scale. 9. If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is raise prices 10. If a competitive firm's marginal cost curve is U-shaped then its short run supply curve is the upward-sloping portion of the marginal cost curve.

Explanation / Answer

6. False.

Explanation: Marginal cost refers to the change in total cost because of increasing production by 1 unit. So, marginal cost is the marginal change to total cost. Marginal cost can be calculated by taking the derivative of total cost with respect to quantity.

Marginal cost = d/dQ (total cost) = d/dQ(200 + 5Q) = 5

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