Test 4-production function PT3

Question 1

rising marginal cost

Answer 1

marginal cost rises with the quantity of output produced

Question 2

average total cost

Answer 2

is U shaped

is the sum of AFC & AVC

Question 3

AFC

Answer 3

always declines as output rises

because the fixed costs is spread over a larger # of units produced

Question 4

AVC

Answer 4

typically rises as output increases

because of diminishing marginal product

Question 5

efficient scale

Answer 5

the quantity of output that minimizes ATC
(costs are at its lowest)

Question 6

the relationship between MC & ATC

If MC is lower than ATC…

Answer 6

the cost of adding one more unit of output is low

Question 7

the relationship between MC & ATC

If MC is higher than ATC…

Answer 7

The cost of adding one more unit of output is Higher