Consider the short- run costs of a firm.Suppose the firm's total fixed costs are $100 and average variable costs are constant regardless of output.Which of the following is then true?
A)Average total cost will decrease when output is increased.
B)Marginal cost will be rising as output rises.
C)Average total costs will be constant.
D)Marginal cost will equal average total cost.
E)Marginal cost will be less than average variable cost.

Question

Quizplus · Accepted Answer

In the short run, if average variable costs are constant, increasing output will spread the fixed costs over more units, thus decreasing average total cost.

Consider the Short- Run Costs of a Firm