The figure at right illustrates short-run cost curves for a firm. Based on this figure, which of the following is true? O A. A is the total cost curve, B is the marginal cost curve, and C is the total fixed cost curve. O B. A is the average variable cost curve, B is the total fixed cost curve, and C is the average total cost curve. O C. A is the total cost curve, B is the total variable cost curve, and C is the total fixed cost curve. O D. A is the total cost curve, B is the total variable cost curve, and C is the marginal cost curve. ⒸE. A is the average variable cost curve, B is the average total cost curve, and C is the marginal cost curve. Quantity A B с

The figure at right illustrates short-run cost curves for a firm. Based on this figure, which of the following is true? O A. A is the total cost curve, B is the marginal cost curve, and C is the total fixed cost curve. O B. A is the average variable cost curve, B is the total fixed cost curve, and C is the average total cost curve. O C. A is the total cost curve, B is the total variable cost curve, and C is the total fixed cost curve. O D. A is the total cost curve, B is the total variable cost curve, and C is the marginal cost curve. ⒸE. A is the average variable cost curve, B is the average total cost curve, and C is the marginal cost curve. Quantity A B с

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the Acme Gumball Company has a fixed proportions production function that requires it to use two gumball presses and one worker to produce 1,000 gumballs per hour. a. Explain why the cost per hour of producing 1,000 gumballs is 2v + w (where v is the hourly rent for gumball presses and w is the hourly wage). b. Assume Acme can produce any number of gumballs they want using this technology. Explain why the cost function in this case would be TC = q(2v +w), where q is output of gumballs per hour, measured in thousands of gumballs. c. What is the average and marginal cost of gumball production (again, measure output in thousands of gumballs)? (show the complete formula) Draw the graph for the average and marginal cost curves for gumballs assuming v=3, w-5 (show working) Now draw the graph for these curves for v=6, w=5.( show working) Explain why these curves have shifted.
Which of the following is always true? When marginal costs are less than average total costs, average total costs will be decreasing. When average fixed costs are falling, marginal costs must be less than average fixed costs. O When average fixed costs are rising, marginal costs must be greater than average total costs. When marginal costs are greater than average total costs, average total costs will be decreasing.
Consider the three figures below, depicting possible cost functions for a firm. The horizontal axis measures output in all figures, while the vertical axis measures dollars. A B Which of the following statements are correct? Choose one or more: ⒸA. Figure A could represent the average total cost. OB. Figure B could represent the average total cost. C. Figure C could represent the average total cost. OD. If Figure B represents the average variable cost, then Figure C could not represent the average total cost. OE. If Figure B represents the marginal cost, then Figure C cannot represent the average total cost.
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As output rises, which of the following always increases? variable cost only marginal cost only total cost and variable cost total cost only O fixed cost only
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For a firm with a Total Cost function TC C(Q), recall that the definitions of Marginal Cost (MC) and AverageTotal Cost (ATC) are given as follows:Marginal Cost (MC) = C'(0)Average Total Cost (ATC) = C(Q)/QProve that the marginal cost is equal to the average total cost (MC = ATC) when the average total cost is at itsminimum value.(Hint: By using the definition of average cost function, find the quantity that minimizes it by applying unconstraint optimization.Show that the FOC of the minimization problem implies that MC=ATC has to be satisfied at the minimum level of average cost.)