Figure 5.4 shows a firm's marginal cost, average total cost, and average variable cost curves. The average total cost curve is downward-sloping as output increases from Q = 50 to Q = 100 because:
A. increasing average variable cost outweighs decreasing average fixed cost.
B. decreasing average fixed cost outweighs increasing average variable cost.
C. diminishing returns are not severe enough to outweigh decreasing average fixed cost.
D. marginal cost is increasing.
Answer: B
You might also like to view...
Which of the following is an example of peak-load pricing?
A) Charging less for vacations to Hawaii during December and January B) Charging more for electricity on hot days C) Setting price equal to marginal cost when there is a capacity constraint D) Selling excess capacity at lower prices
The four components of aggregate expenditure (AE) are:
A. consumption, internet, government, and capital spending. B. consumption, investment, government, and capital spending. C. consumption, investment, government, and net export spending. D. consumption, investment, exports, and imports.
Assume that U.S. imports remain constant while U.S. exports change, ceteris paribus. Which of the following statements is correct?
a. A decrease in U.S. exports increases U.S. net exports. b. An increase in U.S. exports shifts the aggregate demand curve rightward. c. An increase in U.S. exports decreases U.S. net exports. d. A decrease in U.S. exports shifts the aggregate demand curve rightward.
In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y ? 20,000r, the interest rate is currently 5 percent (0.05). If potential output equals 11,750, the central bank must ________ the interest rate to close the ________ gap.
A. raise; expansionary B. reduce; expansionary C. reduce; recessionary D. raise; recessionary