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Chapter 20: Problem 19

Average variable cost is found by dividing __________ (LO4) a) variable cost by output b) output by variable cost c) marginal cost by output d) output by marginal cost

Short Answer

Expert verified
The correct way to calculate the average variable cost is by dividing variable cost by output (Option A).

Step by step solution

01

Option A: Variable cost by output

Divide the variable cost by the output to find the average variable cost. The average variable cost calculates how much it costs to produce a single unit of a product, taking into account the variable costs involved (for example, labor and raw materials). This option is the correct way to calculate the average variable cost.
02

Option B: Output by variable cost

Dividing output by variable cost does not provide the average variable cost. This calculation would essentially tell us how many units of output can be produced per dollar of variable cost, which is not the same as determining the cost per unit of output. Therefore, this option is incorrect.
03

Option C: Marginal cost by output

Dividing the marginal cost by output is not the correct way to calculate the average variable cost. Marginal cost refers to the additional cost incurred to produce an additional unit of output. Dividing the marginal cost by the output would not provide a meaningful result in the context of average variable cost. This option is incorrect.
04

Option D: Output by marginal cost

Dividing output by marginal cost is not the correct way to calculate the average variable cost. This calculation would essentially tell us how many units of output can be produced per dollar of marginal cost, which does not help us determine the cost per unit of output. This option is incorrect. As we have analyzed the options, the correct way to calculate the average variable cost is:
05

Answer:

Option A: Variable cost divided by output.

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Most popular questions from this chapter

When \(\mathrm{MC}\) is rising but still below ATC, then __________ ( LO5) a) ATC is declining b) ATC is constant c) ATC is rising d) there is no way of determining what ATC is doing

\(\mathrm{Al}\) and George's used car lot has total revenue of \(\$ 5\) million, fixed costs of \(\$ 8\) million, and variable costs of \(\$ 4\) million. In the short run the firm will__________ and in the long run it will \((\mathrm{LO8})\)__________ a) shut down, go out of business b) shut down, stay in business c) operate, stay in business d) operate, go out of business

The salaries paid to people who are in the middle of three-year guaranteed contracts are __________ \- (LO1) a) a fixed cost b) a variable cost c) a fixed cost or a variable cost d) neither a fixed cost nor a variable cost

Which of the following is the most accurate statement? (LO1,8) a) Virtually no one getting married thinks that considering whether or not to have a large wedding is mainly an economic decision. b) Most American families holding large weddings get by for less than \(\$ 2,000\). c) When making a wedding, it is impossible to think in terms of fixed costs and variable costs. d) Whether to hold a wedding in city hall or in a wedding hall is at least partially an economic decision.

Each of the following provides an example of economies of scale except __________ ( LO7) a) the computer software industry b) the pharmaceutical industry c) Adam Smith's pin factory d) movie and TV production e) the services of psychiatrists, personal trainers, barbers, and beauticians
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