A firm enters into a consent decree to avoid a major legal setback.If the terms of the consent decree effectively double the firm's fixed costs,then _____
A)marginal cost more than doubles.
B)marginal cost doubles.
C)marginal cost remains unchanged.
D)average total cost remains unchanged.
E)average variable cost doubles.

Question

Quizplus · Accepted Answer

Marginal cost remains unchanged because it is determined by the cost of producing one more unit of a good or service, which is not affected by fixed costs. Fixed costs are costs that do not change with the level of output, such as rent or salaries, whereas marginal cost is related to variable costs that change with output.

A Firm Enters into a Consent Decree to Avoid a Major