The figure given below shows cost curves of a firm. Figure: 7.2
- In the figure,
|: Marginal cost curve
||: Average total cost curve
|||: Average variable cost curve
Refer to Figure 7.2.At an output level of H,total fixed cost is:
A)SR.
B)LK.
C)BE.
D)area BEMN.
E)area 0EMH.

Question

The figure given below shows cost curves of a firm. Figure: 7.2 
- In the figure,
|: Marginal cost curve
||: Average total cost curve
|||: Average variable cost curve
Refer to Figure 7.2.At an output level of H,total fixed cost is:
A)SR. 
B)LK. 
C)BE. 
D)area BEMN. 
E)area 0EMH.

Quizplus · Accepted Answer

At an output level of H, the total cost can be found by looking at the intersection of the ATC and MC curves. From the figure, we can see that the intersection point is at point M. Therefore, the total cost at an output level of H is equal to the area of rectangle BEMN, which represents total fixed cost plus total variable cost. Since total variable cost is equal to the area of triangle MEN (AVC * output level), the remaining area (rectangle BEMN minus triangle MEN) must represent total fixed cost. Therefore, the answer is D.

The Figure Given Below Shows Cost Curves of a Firm