Practise interpreting production, cost and revenue evidence for firms across short-run and long-run output decisions.
A firm has fixed costs of $ 300 and can produce two units per hour. Its total variable costs are $ 200 for one unit and $ 300 for two units.
Which cost will fall by the lowest amount when the second unit is produced?
average fixed cost
average total cost
average variable cost
marginal cost
The diagram shows the long-run total cost (LRTC) curve of a firm.
At which output is the long-run average total cost at its minimum?
OW
OX
OY
OZ
What is true about economies of scale but not diseconomies of scale?
They occur because average revenue is increasing.
They occur because of management policy changes.
They occur in the short run.
They occur with decreasing average cost.
When a firm increases all its inputs fourfold, its output increases threefold.
What does this illustrate?
decreasing marginal costs
decreasing returns to scale
economies of scale
the law of diminishing returns
As the number of workers employed by a firm increases, the marginal product of labour decreases but remains positive.
What happens to the firm's total output?
It stops increasing.
It increases at a constant rate.
It increases at a falling rate.
It increases at a rising rate.
