The Typical Average Cost Curve in a Competitive Market Is

question 17

Multiple Choice

The typical average cost curve in a competitive market is:

• A) an upward-sloping straight line because fixed costs are constant, and variable costs are increasing with the level of output.
• B) U-shaped because the firm's fixed costs are first spread over greater quantities, but then increasingly greater quantities will create production capacity constraints.
• C) downward-sloping until fixed costs are eliminated and then it becomes a horizontal line.
• D) U-shaped because increasing quantities of output cause a decrease in fixed costs but an offsetting increase in variable costs.

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Definitions:

Income Tax Rate

The percentage at which individual or corporate income is taxed by the government, which can vary depending on the income level and jurisdiction.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, where the cost is evenly spread over its useful life.

Renovation Cost

The expenses associated with updating or refurbishing an existing structure or space to improve its appearance or functionality.

Initial Investments

The initial outlay of cash required to start a project or an investment, often including purchase of equipment and other startup costs.