The Average Variable Cost of Producing 250 Sundaes Is $5

question 290

Multiple Choice

The average variable cost of producing 250 sundaes is $5. At this level of output, average variable cost is minimized. Which of the following statements is true?

• A) Marginal cost of the 251st sundae is $1,250.
• B) Average total cost is minimized at an output greater than 250 sundaes.
• C) Average fixed cost is minimized at an output less than 250 sundaes.
• D) Total cost of producing 250 sundaes is $1,250.

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Definitions:

Critical Value

A point on the scale of a test statistic beyond which we reject the null hypothesis; it depends on the chosen significance level.

Test Statistic

A value calculated from sample data during a hypothesis test.

Null Hypothesis

A hypothesis that states there is no difference or effect, serving as the default assumption to test against in statistical hypothesis testing.

Alternative Hypothesis

A statistical hypothesis that proposes a difference or effect, contrasting the null hypothesis.