Suppose a Firm's Fixed Costs Are $100 and Average Variable

question 18

Multiple Choice

Suppose a firm's fixed costs are $100 and average variable costs are constant regardless of output. Which of the following is then true?

• A) Average total cost will decrease when output is increased.
• B) Average total costs will be constant.
• C) Marginal cost will be less than average variable cost.
• D) Marginal cost will be rising as output rises.
• E) Marginal cost will equal average total cost.

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Definitions:

Non-contributory Plan

A benefits arrangement where only the employer bears the cost of premiums, requiring no monetary contribution from employees.

Contributory Plan

A retirement or insurance plan where both the employer and employees contribute to the fund.

Registered Retirement Savings Plans

Tax-advantaged savings accounts in Canada designed to help individuals save for their retirement.

Defined Non-contributory Plan

A type of pension plan where the employer bears the entire cost of the contributions without requiring contributions from the employees.