Given the total cost function TC = a + bQ,with both a 0 and b 0,average cost will
A) be approximately constant over most of the output range.
B) fall at first and then rise as output rises.
C) fall over the entire range of output.
D) rise at first and then fall as output rises.
E) rise over the entire range of output.

Question

Given the total cost function TC = a + bQ,with both a > 0 and b > 0,average cost will
A) be approximately constant over most of the output range.
B) fall at first and then rise as output rises.
C) fall over the entire range of output.
D) rise at first and then fall as output rises.
E) rise over the entire range of output.

Quizplus · Accepted Answer

Average cost (AC) = TC/Q = (a + bQ)/Q = a/Q + bAs Q increases, a/Q becomes smaller and smaller, so AC approaches b.

Given the Total Cost Function TC = a + BQ,with