Assume That a Firm's Total Cost of Producing an Output

question 35

Multiple Choice

Assume that a firm's total cost of producing an output of 2,000 units is currently $20,000.If output increases to 2,500 units,total cost increases to $50,000 and the price of inputs and technology remain unchanged.What will be the effect on average total cost?

• A)Increase of $20
• B)Decrease of $10
• C)Increase of $10
• D)No change

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Definitions:

Comprehensive Income

The total change in equity for a business enterprise during a period from transactions and other events from non-owner sources, including all revenues, gains, expenses, and losses.

Net Income

The profit of a company after all expenses and taxes have been subtracted from total revenue.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value due to wear and tear, aging, or obsolescence.

EAC Method

Equivalent Annual Cost Method, a decision-making tool used for evaluating the cost-effectiveness of projects with differing lifespans.