Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?
A) MC = AVC
B) MC = AC
C) MC AFC
D) All of the above.

Question

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?
A) MC = AVC
B) MC = AC
C) MC > AFC
D) All of the above.

Quizplus · Accepted Answer

The marginal cost (MC) is the additional cost of producing one more unit of output. It is given by the first derivative of the total cost (TC) function with respect to the quantity (q).

MC = dTC/dq = 2

The average variable cost (AVC) is the variable cost per unit of output. It is given by the total variable cost (TVC) divided by the quantity (q).

TVC = TC - TFC = (50 + 2q) - 50 = 2q

AVC = TVC/q = 2

Therefore, MC = AVC at all levels of production. Statements B and C are not true at all levels of production. Statement D is incorrect because only statement A is true.

Suppose the Total Cost of Producing T-Shirts Can Be Represented