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Chapter 20: Problem 8

Which of these statements is false? (LO8) a) When the firm shuts down, output is zero. b) When variable cost is zero, output is zero. c) When output is zero, total cost is zero. d) None of these is false.

Short Answer

Expert verified
Statement C: When output is zero, total cost is zero. This statement is false because even when output is zero, the firm still has fixed costs to cover.

Step by step solution

01

Statement A: When the firm shuts down, output is zero.

This is a true statement. When a firm decides to shut down, it stops producing any goods or services, and so its output becomes zero.
02

Statement B: When variable cost is zero, output is zero.

This is not necessarily true. Variable costs are costs that change as a firm produces more output. If variable costs are zero, it means the firm has no costs that change with output. However, this doesn't necessarily mean that the output is also zero, because the firm could still be producing something with fixed costs.
03

Statement C: When output is zero, total cost is zero.

This statement is false. When output is zero, it means the firm is not producing any products. However, even if the firm is not producing anything, the total cost is not necessarily zero. The firm still has to cover fixed costs, such as rent, utilities, and salaries - all of which are incurred regardless of production levels. Thus, the total cost does not become zero just because the output is zero.
04

Statement D: None of these is false.

Since we have already established that Statement C is false, this statement is also false.

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Most popular questions from this chapter

The decision to shut down is made in __________ (LO8) a) both the short run and the long run b) neither the short run nor the long run c) the long run d) the short run

As output expands to larger and larger numbers, __________ continues to decline. (LO5) a) \(\mathrm{AFC}\) b) \(\mathrm{AVC}\) c) \(\mathrm{ATC}\) d) \(\mathrm{MC}\)

Which statement is false? \((\mathrm{LO} 4,5)\) a) \(\mathrm{AFC}\) plus \(\mathrm{AVC}\) equals \(\mathrm{ATC}\). b) Marginal cost equals AVC at an output of one. c) AVC equals ATC at an output of one. d) None is false.

As output increases, eventually __________ (LO7) a) economies of scale become larger than diseconomies of scale b) diseconomies of scale become larger than economies of scale c) economies of scale and diseconomies of scale both increase d) economies of scale and diseconomies of scale both decrease

In general, as output rises you first attain __________ (LO6) a) increasing returns, then diminishing returns, then negative returns b) diminishing returns, then negative returns, then increasing returns c) negative returns, then increasing returns, then diminishing returns d) increasing returns, then negative returns, then diminishing returns
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