Which of the costs discussed in the chapter is the most important when a firm is deciding how much to produce?
A. Marginal cost because this cost shows the additional cost associated with producing one more unit of output. Firms will use this information to decide to produce more or less output.
B. Variable costs because these costs change as output changes. If the firm wants to maximize profits, it will choose to produce a quantity where variable costs are minimized.
C. Fixed costs because these costs are spent and cannot be changed in the time period under consideration. If fixed costs are higher, the firm will choose to produce more output.
D. Costs that are spent to improve the image of the firm. A firm will choose to increase output if it spends a large amount on advertising and brand image.
Ans: A. Marginal cost because this cost shows the additional cost associated with producing one more unit of output. Firms will use this information to decide to produce more or less output.
You might also like to view...
Assuming all else equal, if a firm decides to pay more dividends and lowers the amount of retained earnings it holds, it will cause:
A) an upward movement along the current credit supply curve of the firm. B) a downward movement along the current credit supply curve of the firm. C) the current credit supply curve of the firm to shift to the left. D) the current credit supply curve of the firm to shift to the right.
If the average-total-cost curve is falling, then the marginal-cost curve must also be falling
a. True b. False Indicate whether the statement is true or false
In the short run, a firm will produce a positive amount of output as long as
a. P > AVC at some output level b. P > MC at some output level c. P < AVC at some output level d. AVC < ATC at some output level e. FC > TR at some output level
If the price of inputs rises and consumer expectations about future economic activity worsens:
a. Price index falls, and real GDP falls. b. Price index falls, and the change in real GDP is uncertain. c. The change in price index is uncertain, and real GDP rises. d. The change in price index is uncertain, and real GDP falls. e. Neither the price index nor real GDP changes.