QUESTION 7 Liz produces lemonade in a perfectly competitive market. Her only fix

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QUESTION 7 Liz produces lemonade in a perfectly competitive market. Her only fixed cost is the rent she pays for her factory. Which of the following statements are true Liz's average fixed costs will always be constant in this situation Liz's average variable cost curve will always be linear in this situation If quantity produced increases, Liz's average fixed costs will decrease The average variable cost curve will intersect the minimum of the average total cost curve QUESTION 8 Christina operates an ice-cream store and sells ice-creams in a perfectly competitive market. Regardless of the quantity of ice- creams she produces, Christina must pay rent for her store. Meanwhile, costs for ingredients and machinery are dependent on how many ice-creams she produces Select the item from the list provided to make the following statements true 1. economic loss 2. fixed cost 3. minimum average variable cost Christina's rent is an example of a The market price (S/ice-cream) has to be larger than the making an economic profit at a given level of production (S/ice-cream) to be certain Christina is 4. marginal cost 5. average total cost 6. economic profit 7. market price 8. average variable cost 9. total cost 10.average fixed cost 11. variable cost 12.minimum average total cost Christina should shut down her store if the market price for ice-creams falls below the

Explanation / Answer

7) The asnwer is A -) Liz's average fixed cost will always be constant in this situation.

because, Liz's only fixed cost is her rent for the factory. no matter how much she produced , the rent remain the same , therefore fixed cost will remain the same. and hence average fixed cost will constant.

8) a) FIXED COST.

b) Average total cost.

c) minimum average variable cost.

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