Question

Average variable cost

	A.	decreases when its value is greater than marginal cost, and increases when its value is less than marginal cost.
	B.	decreases when its value is less than marginal cost, and increases when its value is greater than marginal cost.
	C.	is perpetually increasing, sometimes initially at increasing rates but eventually at decreasing ones.
	D.	perpetually decreases.

Average fixed costs

	A.	are perpetually decreasing as output increases, but at a decreasing rate.
	B.	are perpetually decreasing as output increases, and at an increasing rate.
	C.	are perpetually increasing as output increases, but at a decreasing rate.
	D.	are perpetually increasing as output increases, and at an increasing rate.

Marginal cost

	A.	is calculated as total cost divided by total output.
	B.	is calculated as the change in total cost divided by the change in total output.
	C.	may or may not be increasing initially, but eventually will be decreasing.
	D.	may be negative or positive

In the long run when an increase in the quantity of output is accompanied by an increase in average total cost, this is called

	A.	economies of scale.
	B.	diseconomies of scale.
	C.	constant economies to scale.
	D.	increasing marginal cost.

Answer 1

Ans: A ) decreases when its value is greater than marginal cost, and increases when its value is less than marginal cost.

Explanation:

When AVC > MC then AVC decreases

Ans:A ) are perpetually decreasing as output increases, but at a decreasing rate.

Explanation:

Average fixed costs are perpetually decreasing as output increases, but at a decreasing rate.

Ans: B) is calculated as the change in total cost divided by the change in total output.

Explanation:

Marginal Cost = change in total cost / change in total output.

Ans: B) diseconomies of scale.

Explanation:

In the long run when an increase in the quantity of output is accompanied by an increase in average total cost, this is called diseconomies of scale.