A Firm Has Average Fixed Costs of $0

question 297

Multiple Choice

A firm has average fixed costs of $0.20 and average variable costs of $2.50 at an output of 500 units. The firm's total costs are therefore

• A) $1,250.
• B) $1,350.
• C) $1,150.
• D) $1,500.

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Definitions:

Marginal Revenue

The surplus earnings acquired through the sale of an extra product or service unit.

Increasing Output

The process of raising the quantity of goods or services produced by a company or economy, often aiming for higher efficiency and profitability.

Marginal Analysis

The examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Total Cost

The sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.