The Typical Pattern of Costs for a Perfectly Competitive Firm

question 21

Multiple Choice

The typical pattern of costs for a perfectly competitive firm can be analyzed by using:
I. total cost
II. fixed cost
III. variable cost
IV. marginal cost
V. average cost
VI. average variable cost

• A) I, II, and III
• B) I, III and IV
• C) I, II, III, IV, and VI
• D) all of the above

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Definitions:

Average Total Cost

The total cost of production divided by the number of units produced.

Implicit Costs

The opportunity costs of using resources owned by the firm for its project instead of selling or renting them to others.

Fixed Costs

Costs that do not vary with the level of production or output, such as rent, salaries, and insurance.

Variable Costs

Variable costs are expenses that change in proportion to the level of production or business activity.