Which of the Following Is True at the Quantity at Which

question 101

Multiple Choice

Which of the following is true at the quantity at which average total cost equals average revenue?

• A)Economic profit is zero.
• B)Marginal cost equals marginal revenue.
• C)Economic profit is maximized.
• D)Total revenue is maximized.
• E)Total cost is minimized.

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Definitions:

Total Variable Costs

This represents the sum of all costs that vary with the level of output in the production process, such as materials and labor directly involved in making a product.

Average Fixed Costs (AFC)

The fixed costs of production (not varying with output) divided by the quantity of output produced; typically decreases as production increases.

Total Fixed Costs (TFC)

The sum of all costs that remain constant regardless of the level of production or output in the short run.

Average Fixed Cost

The fixed costs of production divided by the total units of output, which decreases as production increases.