Teip -Marcus Shepher 15-01) Principles of Economics 015-01) Principles of Econom
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Teip -Marcus Shepher 15-01) Principles of Economics 015-01) Principles of Economics Micro 2 Costs of production (Ch 7) Quiz 3 Question5 Not yet answered Marked out of 1.00 P Flag question As output increases, average fixed cost Select one: O O O a. decreases, because fixed costs spread over a larger number of units. b. increases because costs add up c. remains constant, because total fixed cost is a constant. d. decreases and then increases, because it is a U-shaped curve. Nex Previous page Perfect Competition (Ch 8) Study Resources Jump to...Explanation / Answer
Question 5
As output increases, average fixed cost
a. Decreases, because fixed cost spread over a larger number of units.
Question 6
Average Total Cost of making 10 cakes is $2.80
So TC will be 10*$2.80 = $28
Average Total Cost of making 11 cakes is $3.00
So TC will be 11*$3.00 = $33
MC = $33 - $28 = $5
Answer – d. $5.00
Question 7
Which one would be the correct decision, if a firm’s faces a marginal cost of producing its product at 10 cents and the average cost is 6 cents. For the firm to maximize its average total costs, the firm should
Answer – b. Decrease production
Question 8
Homer starts his own business of sugar
Revenue = $20,000
Explicit (accounting cost)
Sugar $5000 + Bags $2000 + Labor $1000 + Keep the bees away $1000 = $9000
Implicit cost = $30,000
Total Economic Cost = $9000 + $30,000 = 39,000
Economic Profit = $20,000 - $39,000 = -19,000
Answer c. -19,000
Question 9
When it is true that a firm’s average variable cost to exceed the average total cost?
Answer a. Never
Question 10
Which one is true for ABC corp. that produced 100 million units of its product at an average cost of $6 last year and in this year it expanding its plant capacity and produced 200 million units at an average cost of $6.20 that it is experiencing?
Answer d. Diseconomies of scale
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