Explain the relationship between average fixed cost and marginal cost.
What will be an ideal response?
By definition, the total fixed cost does not vary with the output level. On the other hand, the marginal cost is the change in total cost as an additional output is produced. With a fixed production facility, any change in total production cost comes from a change in total variable cost because total fixed cost does not change. Thus, there is no relationship between the average fixed cost and the marginal cost.
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Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?
A) The MR curve lies below the demand curve. B) The firm produces the quantity at which the MR curve intersects the MC curve. C) The MC curve intersects the ATC curve at the ATC curve's lowest point. D) The firm's price equals the price at which the MR curve intersects the MC curve.
Given that energy is an input in production, the development of a cheaper source of energy will result in:
a. a lower price level and a lower amount of production. b. a higher price level and a higher amount of production. c. a lower amount of production at every price level. d. a higher amount of production at every price level. e. a lower profit at every price level.
Which of the following is an implication of the law of diminishing returns?
a. Total output will decline as more workers are hired. b. In the long run, average total cost will eventually decline as output is expanded. c. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. d. A doubling of all inputs will lead to more than a doubling of output.
For any competitive labor market, what change would have to occur to cause the labor supply to decrease and shift the supply curve left?
A. Opportunity cost of work increases B. None of these statements is true. C. Number of workers increases D. Number of firms increases