27. Use the following two statements to answer this question:

1. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output.

II The marginal cost of a given level of output is the slope of the line that is tangent to the total cost curve at that level of output.

Both I and II are true.

28. For any given level of output: none of the above is necessarily correct.

29. In a short‑run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus, marginal cost is below average variable cost.

30. In a short‑run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is

below average total cost.

31. Which of the following relationships is NOT valid?

Rising marginal cost implies that average total cost is also rising.

Figure 7.1

32. Refer to Figure 7.1. The diagram above contains _____ cost curves.

1. short run

33. Refer to Figure 7.1. At output level Q₁ all of the above.

34. Refer to Figure 7.1. At output level Q₂

1. average variable cost equals average fixed cost.

35. Refer to Figure 7.1. At output level Q₃ average variable cost reaches its minimum.

36. Refer to Figure 7.1. At what level of output does average total cost equal marginal cost?

1. Q₄.

37. Refer to Figure 7.1. At what level of output are average total cost, average cost, average fixed cost and marginal cost increasing?

1. none of the above.

38. Which always increase(s) as output increases?

1. Total Cost and Variable Cost

39. Consider the following statements when answering this question;

I. A firm's marginal cost curve does not depend on the level of fixed costs.

2. As output increases the difference between a firm's average total cost and average variable cost curves cannot rise. I and II are both true.

40. Consider the following statements when answering this question

I. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then the marginal costs of production are constant too.

II. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then short-run average total costs cannot rise as output rises.

1. I and II are both true.

41. Consider the following statements when answering this question

I. If the marginal product of labor falls whenever more labor is used, and labor is the only factor of production used by the firm, than at every output level the firm's short run average variable cost exceeds marginal cost.

II. If labor obeys the law of diminishing returns, and is the only factor of production used by the firm, then at every output level short-run average variable costs exceed marginal costs.

1. I is true, and II is false.

42. Consider the following statements when answering this question

I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too.

2. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too. I is false, and II is true.