Suppose a Firm with the Usual U-Shaped Cost Curves Is

question 6

Multiple Choice

Suppose a firm with the usual U-shaped cost curves is producing a level of output such that its short-run costs are as follows: ATC = $0.37 per unit
AVC = $0.32 per unit
AFC = $0.05 per unit
MC = $0.43 per unit
Given these short-run costs,as the firm increases its output,which of the following statements is true?

• A)Marginal product of the variable factor must be decreasing.
• B)Marginal product of the variable factor must be increasing.
• C)The point of diminishing average product of the variable factor has not yet been reached.
• D)Average product of the variable factor must be increasing.
• E)Marginal product of the variable factor is at its minimum point.

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Definitions:

Measure Of Activity

A parameter or unit used to quantify the level of operational or production activity within a specific period.

Product Margin

Product Margin is the difference between the selling price of a product and the costs associated with its production and sale, showcasing the profitability of specific products.

Activity Cost Pools

Groups of costs associated with particular activities, used in activity-based costing to allocate costs more precisely.

Activity-based Costing

An accounting method that assigns costs to products based on the activities performed in producing that product, providing more accurate product costing.