Chapter 20 Flashcards
In the short run, the ATC curve is ——- above the AVC curve.
Always
As outpout rises,
AFC falls
IF fixed cost is $5000, and, At an output of 3 variable cost is $4000, how much is average total cost at an output of 3?
$3,000
If fixed cost is $8,000, variable cost is $5,000 at an output of 2 and $9,000 at an output of 3, how much is marginal cost at an output of 3?
$4,000
Which statement is true 1?
AFC declines with output
The phrase “spreading the overhead” refers to
the decrease in average fixed cost that occurs as a firm increases its output
A firm has a fixed cost of $2000, and at an output of one, variable cost is $1,500. How much is marginal cost at an output of 1
$1,500
Which statement is false?
The AFC curve is U-shaped
Which statement is true 2?
Only varible cost varies with output.
In the long run
All cost become variable
The average fixed cost curve
slopes downward to the right as output rises
As output rises, average fixed cost
falls
Which statement is true 3?
Going out of business or not going out of business are long run options
If a firm cannot cover its variable costs, it will
shutdown in the short run and go out of business in the long run
Both Jill and John own toothpick factories. Jill’s factory has low fixed cost and high variable cost. John’s factory has high fixed costs and low variable costs. Currently each factory is producing 1,000 boxes of toothpicks at the same total cost. Complete the following statement with the correct answer. If each produces
more, the costs of Jill’s factory will exceed those of John’s factory
Average variable cost is equal to
average total cost minus average fixed cost
Fixed costs are best defined as
costs that will not vary with the firm’s output level over some period of time
A variable input is an input that can change
in both the long run and the short run
Which is most clearly a variable cost?
Wages of production workers
Fixed cost is sometimes referred to as
sunk cost
Jimmy, Walter, Mike and Bill run a school for political candidates, The school has fixed costs of $10 million, variable costs of $4 Million and total revenue of $15 million. In the short run the school will ——– and in the long run the school will —–.
Operate and stay in business
The basic characteristic of the short run is that
the firm does not have sufficient time to change the size of the plant.
In the short run 2
some cost are fixed
Average total cost is found by dividing
total cost by output
Average variable cost is found by dividing
variable cost by output
