Average Total Cost Is Equal to

question 18

Multiple Choice

Average total cost is equal to

• A) average fixed cost + average variable cost.
• B) total cost ÷ quantity.
• C) the change in total cost when output changes by one unit.
• D) Answers A and B are correct.
• E) Answers A and C are correct.

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Definitions:

Base Rate Fallacy

A cognitive error where individuals ignore general statistical information (base rates) in favor of specific anecdotal information.

Representativeness Heuristic

A mental shortcut used to make decisions or judgments by comparing information to our mental prototypes and stereotypes.

Anchoring and Adjustment Heuristic

A cognitive bias where an individual relies too heavily on an initial piece of information (anchor) when making decisions, with insufficient adjustments made thereafter.

Gambler's Fallacy

The erroneous belief that if something happens more frequently than normal during a given period, it will happen less frequently in the future, or vice versa.