16.) Average variable cost is equal to - average cost plus average fixed cost. -
ID: 1223997 • Letter: 1
Question
16.) Average variable cost is equal to
- average cost plus average fixed cost.
- marginal cost plus average fixed cost.
- marginal cost.
- average total cost minus average fixed cost.
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18.) George and Dan's political consulting firm is losing money, but it is more than covering its fixed costs. What is the most accurate statement we can make about it?
- It will stay in business in the long run.
- It will go out of business in the long run.
- It will shut down in the short run.
- None of these statements are correct.
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14.) As a firm's output expands, the
- ATC will reach a minimum before the AVC.
- AVC will reach a minimum before the ATC.
- ATC and AVC will reach minimums at the same output.
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MC $70 ATC AVC 60 D,MR 30 20 10 50 100 150 200 250 300 350 400 Output 16.) Using the above graph, the firm's break-even point occurs at an output of A. 100 B. 150 C. 215. D. 300 870 17.) Using the above graph, this firm's most profitable output is at A. 150 B. 230 C. 300 D. 350Explanation / Answer
16) - average total cost minus average fixed cost.
Total cost is sum of fixed cost and variable cost. Fixed cost is independent of production while variable cost depends upon quantity of production.
18) It will stay in the business in the long run. As the firm is covering its fixed cost and part of variable cost. With increase in services more revenue will accrue and firm might be profitable.
14) AVC will reach a minimum before the ATC. ATC is sum of AFC and AVC therefore AVC reaches its minimum earlier than ATC.
16) D. 300
At 300 units, Total revenue equals to total cost and firm is in no profit no loss situation and thus it is break even.
17) B. 230
At 230 units of production. there is maximum gap between Price and cost and cost is less than price. Profit is equal to total revenue - total cost.
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