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:

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The official currency of Canada, often symbolized as CAD, which is used across the country and in international financial transactions.

Absolute Purchasing Power Parity

A theory that in the long term, exchange rates should move towards rates that would equalize the prices of an identical basket of goods in any two countries.

Canadian Dollar

The currency of Canada, often represented by the symbol CAD.