Average Variable Costs

question 89

Multiple Choice

Average variable costs:

• A)decrease when marginal product rises and increase when marginal product declines.
• B)increase when marginal product rises and decrease when marginal product declines.
• C)increase when output declines and decrease when output rises.
• D)decrease when output declines and increase when output declines.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance premiums.

Marginal Costs

Marginal costs represent the change in total production cost that arises when the quantity produced is incremented by one unit, essentially the cost of producing one additional unit of a good.

Marginal Productivity

Marginal productivity is the additional output that is produced by using one more unit of a certain input, assuming that all other inputs remain constant.

Total Output

The complete quantity of goods or services produced by a company, sector, or economy within a given period.