Suppose Consumption Is $5,000 When Income Is $8,000 and the MPC

question 51

Multiple Choice

Suppose consumption is $5,000 when income is $8,000 and the MPC equals 0.9. When income increases to $10,000, consumption is

• A) $2,700.
• B) $4,500.
• C) $6,800.
• D) $7,200.

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Definitions:

Variable Cost

Costs that change in proportion to the level of output in the production process.

Marginal Product

The marginal product is the additional output produced as a result of using one more unit of a particular input, holding all other inputs constant.

Average Variable Cost

The total variable costs divided by the quantity of output produced, indicating the variable cost per unit of output.

Average Fixed Cost

Average fixed cost is the fixed cost per unit of output, calculated by dividing total fixed costs by the number of units produced, which decreases as production increases.