Assume a Firm Is Operating at Minimum Average Total Cost

question 315

Multiple Choice

Assume a firm is operating at minimum average total cost in the short run. If there is a decrease in output, it follows that

• A)marginal cost increases.
• B)average fixed cost increases.
• C)average total cost decreases.
• D)average variable cost increases.

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Definitions:

Break-Even

The point at which total costs equal total revenue, resulting in neither profit nor loss.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Fixed Costs

Expenses that do not change with the level of output or activity, such as rent, salaries, and insurance premiums.

Break-Even

The point at which total revenues equal total costs, resulting in neither profit nor loss.