Cost Classification and Relationships Quiz

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Which cost is the summation of all expenses that do not change as the level of production varies?

Total variable cost (TVC)
Total cost (TC)
Total fixed cost (TFC) (correct)
Marginal cost (MC)

What is the relationship between the total cost (TC) curve and the total variable cost (TVC) curve?

The TC curve lies above the TVC curve.
The TC curve is parallel to the TVC curve. (correct)
The TC curve intersects the TVC curve at their minimum points.
The TC curve lies below the TVC curve.

At zero production, what is the value of total cost (TC)?

Greater than total fixed cost (TFC)
Equal to total variable cost (TVC)
Less than total variable cost (TVC)
Equal to total fixed cost (TFC) (correct)

What is the relationship between average fixed cost (AFC) and output quantity?

AFC decreases as output quantity increases. (A) Signup and view all the answers

What is the shape of the average total cost (ATC) curve and the average variable cost (AVC) curve?

Both curves are U-shaped. (A) Signup and view all the answers

Where does the marginal cost (MC) curve intersect the average variable cost (AVC) curve?

At point S (B) Signup and view all the answers

When is the average variable cost (AVC) curve decreasing?

When MC is less than AVC (A) Signup and view all the answers

Where does the marginal cost (MC) curve intersect the average total cost (ATC) curve?

At point T (D) Signup and view all the answers

When is the average variable cost (AVC) curve increasing?

When MC is greater than AVC (B) Signup and view all the answers

What is the difference between average total cost (ATC) and average variable cost (AVC) at output quantity Q1?

The amount of AFC (B) Signup and view all the answers

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 (A) Signup and view all the answers

What happens to average total cost (ATC) as output increases beyond a certain point?

ATC increases (C) Signup and view all the answers

Which of the following is considered a fixed cost?

Debt service (D) Signup and view all the answers

What is the relationship between total variable cost (TVC) and quantity?

TVC increases as quantity increases (C) Signup and view all the answers

What is the relationship between TC and TVC?

TC is always greater than TVC (B) Signup and view all the answers

What happens to TC as the firm expands output?

TC increases at a decreasing rate (B) Signup and view all the answers

What is the relationship between MC and AVC in Exhibit 12?

MC is greater than AVC (B) Signup and view all the answers

What is the relationship between MC and ATC in Exhibit 12?

MC is less than ATC (B) Signup and view all the answers

What is the relationship between MC and quantity?

MC increases as quantity increases (D) Signup and view all the answers

What is the relationship between ATC and quantity?

ATC increases as quantity increases up to a certain point (B) Signup and view all the answers