2. Which of the following is not correct for an individual firm? a.If the averag

Question

2. Which of the following is not correct for an individual firm?

a.If the average variable cost (AVC) is decreasing, average total cost (ATC) must be decreasing.

b.AVC reaches minimum before ATC.

c.If ATC is increasing, AVC must be increasing.

d.If AVC is increasing, marginal cost (MC) is increasing.

e.If average fixed cost (AFC) is decreasing, ATC must be decreasing

4. A firm gets less efficient as it gets bigger, if it is experiencing

a.economies of scale

b.constant returns to scale.

c.increasing returns to factors.

d.diseconomies of scale.

e.a period of post war recovery.

Explanation / Answer

2. d.If AVC is increasing, marginal cost (MC) is increasing. (marginal cost must be exceeding average variable cost.)

4. d.diseconomies of scale.

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