20 Questions
Which cost is the summation of all expenses that do not change as the level of production varies?
Total fixed cost (TFC)
What is the relationship between the total cost (TC) curve and the total variable cost (TVC) curve?
The TC curve is parallel to the TVC curve.
At zero production, what is the value of total cost (TC)?
Equal to total fixed cost (TFC)
What is the relationship between average fixed cost (AFC) and output quantity?
AFC decreases as output quantity increases.
What is the shape of the average total cost (ATC) curve and the average variable cost (AVC) curve?
Both curves are U-shaped.
Where does the marginal cost (MC) curve intersect the average variable cost (AVC) curve?
At point S
When is the average variable cost (AVC) curve decreasing?
When MC is less than AVC
Where does the marginal cost (MC) curve intersect the average total cost (ATC) curve?
At point T
When is the average variable cost (AVC) curve increasing?
When MC is greater than AVC
What is the difference between average total cost (ATC) and average variable cost (AVC) at output quantity Q1?
The amount of AFC
Which of the following is true about the relationship between average cost (AC) and marginal cost (MC)?
If MC is less than AC, AC must fall
What happens to average total cost (ATC) as output increases beyond a certain point?
ATC increases
Which of the following is considered a fixed cost?
Debt service
What is the relationship between total variable cost (TVC) and quantity?
TVC increases as quantity increases
What is the relationship between TC and TVC?
TC is always greater than TVC
What happens to TC as the firm expands output?
TC increases at a decreasing rate
What is the relationship between MC and AVC in Exhibit 12?
MC is greater than AVC
What is the relationship between MC and ATC in Exhibit 12?
MC is less than ATC
What is the relationship between MC and quantity?
MC increases as quantity increases
What is the relationship between ATC and quantity?
ATC increases as quantity increases up to a certain point
Test your knowledge of cost classification and relationships with this quiz! Explore the graphical representations of total cost, total fixed cost, and total variable cost in Exhibit 10. Challenge yourself to understand the distinctions between fixed and variable expenses in different production levels.
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