Question

If the rent on factory space (a fixed input) increases, at all levels of output:

A

Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will increase in the short run.

B

Total costs will increase, average total costs will increase, average variable costs will increase, and marginal costs will remain the same in the short run.

C

Total costs will increase, average total costs will increase, average variable costs will remain the same, and marginal costs will remain the same in the short run.

D

Total costs will increase, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run.

Answer 1

C. Total costs will increase, average total costs will increase, average variable costs will remain the same, and marginal costs will remain the same in the short run.

Explanation :

When fixed cost increases total cost increases because, total cost =variable cost +fixed cost.

Average total cost also increases because ATC =total cost /quantity.

Variable cost doesn't changes when fixed cost increases because both are different.

Marginal cost also remains same because total cost will be increase by same amount at every quantity so, MC will also remains same.

MC =change in total cost /change in quantity.