If General Motors cuts back production on the Hummer because of high gasoline prices what should you expect to happen to the average fixed cost of production? What about the average total cost?
What will be an ideal response?
Average fixed costs should rise since the fixed costs will be spread over fewer units. With higher average fixed costs this should also push up the average total cost as well.
You might also like to view...
The price elasticity of demand is a measure of the
A. relationship between price and profitability. B. sensitivity of a good's price to changes in demand. C. responsiveness of buyers of a good to changes in its price. D. effect of changes in demand on the price.
The demand curve shown in the figure above reflects demand that is
A) perfectly elastic. B) perfectly inelastic. C) unit elastic. D) elastic but not perfectly elastic. E) inelastic but not perfectly inelastic.
Quotas are most often supported by
A) foreign producers. B) foreign consumers. C) domestic consumers. D) domestic producers.
If differentiation makes the market demand curve less elastic, then
A) consumer surplus increases. B) the market structure changes into a monopoly. C) price markup over marginal cost is lower than when products are identical. D) price markup over marginal cost is higher than when products are identical.