Asked by Isaac Martinez on Sep 24, 2024
Verified
Average costs _______initially due to the presence of fixed costs and then rise due to _________
A) fall;decreasing marginal costs
B) fall ;increasing marginal costs
C) rise;decreasing fixed costs
D) rise;increasing fixed costs
Average Costs
The total cost of production divided by the quantity produced, often used to evaluate production efficiency.
Fixed Costs
Costs that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance premiums.
Marginal Costs
Marginal costs represent the change in total production cost that arises when the quantity produced is incremented by one unit, essentially the cost of producing one additional unit of a good.
- Examine the effects of fixed and variable expenses on the average cost.
- Ascertain the scenarios in which marginal cost variations result in the elevation or reduction of average costs.
Verified Answer
SD
SYEDA DANIA ZEHRAabout 2 hours ago
Final Answer :
B
Explanation :
Average costs fall initially due to the presence of fixed costs being spread over more units of production, and then rise due to increasing marginal costs as production increases and it becomes more expensive to produce additional units.
Learning Objectives
- Examine the effects of fixed and variable expenses on the average cost.
- Ascertain the scenarios in which marginal cost variations result in the elevation or reduction of average costs.