Multiple Choice
If the price of labor increases, what is the most likely effect on the average total cost (ATC), average variable cost (AVC), and marginal cost (MC) curves for a firm in the short run?
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10. The Costs of Production
Cost-Minimizing Combination of Labor and Capital
Multiple Choice
A firm produces 400 units of output at a total cost of \$1,200. If total variable costs are \$1,000, what is the firm's total fixed cost?
A
\$400
B
\$1,000
C
\$200
D
\$1,200
Verified step by step guidance1
Identify the given information: output quantity (Q) = 400 units, total cost (TC) = \(1,200, and total variable cost (TVC) = \)1,000.
Recall the relationship between total cost, total fixed cost (TFC), and total variable cost: \(\$TC = \$TFC + \$TVC\).
Rearrange the formula to solve for total fixed cost: \(\$TFC = \$TC - \$TVC\).
Substitute the known values into the equation: \(\$TFC = 1200 - 1000\).
Calculate the difference to find the total fixed cost, which represents costs that do not change with output level.
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