If a Firm Increases Its Output and Finds That Its

question 35

Multiple Choice

If a firm increases its output and finds that its average total cost decreases as a result, this implies that

• A) marginal cost exceeds average total cost.
• B) the cost of producing an additional unit of output is more than the average total cost.
• C) average fixed cost is increasing.
• D) average total cost exceeds marginal cost.

Analyze the implications of elasticity on firm’s revenue and pricing strategy.

Understand the concept of income elasticity of demand.

Differentiate between inelastic and elastic demand.

Comprehend the significance of elasticity measurements in economic analysis.

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Definitions:

Connective

A word or phrase that joins together clauses, sentences, or parts of sentences in logical propositions.

Restrictive Clause

A clause that limits or specifies the scope of the noun it modifies and is essential to the meaning of a sentence.

Nonrestrictive Clauses

Clauses that provide additional information which is not essential to the meaning of the sentence and are usually set off by commas.

Restrictive Clauses

Subordinate clauses which serve to precisely define or limit the meaning of a noun in a sentence and are essential to its meaning.