Suppose the Fixed Cost of Building a Nuclear Power Plant

question 225

Multiple Choice

Suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts, what can you say about the marginal cost of the next kilowatt?

• A) b and e.
• B) The marginal cost is equal to $.01.
• C) The marginal cost is equal to $1.01.
• D) The marginal cost is rising.
• E) The marginal cost is falling.

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