Cost Curves

Question 1

Average Fixed Cost

Answer 1

Continual decrease because the cost is fixed (the same) but keeps getting divided by larger quantities.

Question 2

Average Total Cost

Answer 2

ATC=AFC+AVC

Question 3

Marginal Cost

Answer 3

Cost per unit of good

Always crosses ATC and AVC at lowest point

Question 4

Economies of Scale

Answer 4

The more quantity is produced the cheaper it gets

Occurs where ATC is decreasing

Question 5

Diseconomies of Scale

Answer 5

The more quantity produced the more expensive it gets

Occurs where the ATC is increasing

Question 6

Profit Maximizing Point for all markets

Answer 6

MR=MC

Question 7

MRDARP Profit Making Point

Answer 7

Profit making when MRDARP is above ATC

Question 8

Point where Benevolent Social Planner Maximizes Total Surplus

Answer 8

MC=D

Question 9

Production Possibilities Curve

Answer 9

Points on curve are efficient
Points outside are unattainable
Points inside are inefficient

Question 10

Short-Run ATC of Production

Answer 10

AFC+AVC=Average total cost of production

Question 11

Consumer with fixed budget maximizes utility when

Answer 11

The ratios of marginal utility of each good to its price are equal