Economic Cost


Economic costs

A. include both a normal rate of return on investment and the opportunity cost of each factor of production.

B. are equal to the direct costs of hiring all factors of production.

C. are the opportunity cost of each factor of production minus any interest charges paid on borrowed funds.

D. are equal to total revenue minus accounting profit.


Total variable costs

A initially increase as output increases and then decrease.

B always decrease with output.

C always increase with output.

D initially decrease and then increase with output.


Average fixed costs

A are the costs associated with producing an additional unit of output.

B provide a per unit measure of costs.

C fall as output rises.

D reach their minimum at the output level where the average fixed cost curve is intersected by the marginal cost curve.


The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

A a zero

B a constant

C an increasing

D a diminishing

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