A total cost function of the form TC = a + bQ,with both a 0 and b 0,best describes a firm that has
A) small fixed cost and increasing marginal cost.
B) significant fixed cost and increasing marginal cost.
C) small fixed cost and decreasing marginal cost.
D) significant fixed cost and small,constant marginal cost.
E) significant fixed cost and decreasing marginal cost.

Question

A total cost function of the form TC = a + bQ,with both a > 0 and b > 0,best describes a firm that has
A) small fixed cost and increasing marginal cost.
B) significant fixed cost and increasing marginal cost.
C) small fixed cost and decreasing marginal cost.
D) significant fixed cost and small,constant marginal cost.
E) significant fixed cost and decreasing marginal cost.

Quizplus · Accepted Answer

The total cost function TC = a + bQ indicates a fixed cost 'a' and a constant marginal cost 'b'. Since 'a' is significant and 'b' is small and constant, option D is correct.

A Total Cost Function of the Form TC = a