True False Answer Bank Average fixed cost is al way s higher than average variab

Question

True False Answer Bank Average fixed cost is al way s higher than average variable cost. The VC curve is modeled as a horizontal line. All costs are either fixed or variable. The ATC crosses the MC at the lowest point on the MC The ATC is always greater than or equal to AVC TC= FC + VC +MC The ATC is rising when the MC is below the ATC. MC refers to the change in total cost associated with the production of another unit FC+VC The ATC is increasing whenever the MC isincreasing. When fixed costs are positive, the average fixed cost curve is downwaidl-sloping.

Explanation / Answer

True statements lie under heading TRUE whereas false statements lie under heading FALSE.

TRUE-

1) ATC=FC+VC/Q

Average total cost is the total cost divided by quantity and total cost is the sum of fixed cost and variable cost.

2) All cost are either fixed or variable.

3) The ATC is always greater than or equal to AVC.

4) MC is change in total cost associated with the production of another unit.

5) When fixed costs are positive, the average fixed cost curve is downward sloping.

FALSE-

1) The AFC is always higher than AVC

It can be below AVC also as it all depends on the output.

2) The VC curve is horizontal

The Fixed cost curve is horizontal line.

3) The ATC crosses the MC at the lowest point on the MC.

4) TC = FC+VC+MC

Total cost is equal to fixed and variable cost.

5) The ATC is rising when MC is below ATC.

This is not the case.

6) The ATC is rising whenever the MC is rising.

Average total cost is total cost divided by quantity it is not necessary when MC rises ATC also rises.

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