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 will also increases because ATC =total cost /quantity.

Variable cost and fixed cost are different. When fixed cost increases, variable cost remains same. So AVC is remains same.

MC=change in total cost /change in quantity.

Because TC will increase by same amount at every level of output. So MC will remains same at every quantity.