Assume That a Firm's Total Cost of Producing an Output

question 35

Multiple Choice

Assume that a firm's total cost of producing an output of 2,000 units is currently $20,000.If output increases to 2,500 units,total cost increases to $50,000 and the price of inputs and technology remain unchanged.What will be the effect on average total cost?

• A)Increase of $20
• B)Decrease of $10
• C)Increase of $10
• D)No change

Identify the role of variable and fixed costs in various decisions.

Recognize the importance of opportunity costs in decision-making.

Understand the significance of the book value and its role as a potential sunk cost.

Grasp the concept of contribution margin and its application in decisions involving production constraints.