Economics Micro & Macro (CliffsAP)

Marginal cost tells the producer just how much it is going to take to make one more unit of output. Figure 9-5 illustrates
the curves we just mentioned. Notice the shapes of each curve.

Figure 9-5

Mini-Review

1. Which one of the following best describes why the marginal cost decreases and then increases?
   A. Increasing, then decreasing marginal returns
   B. Increasing, then decreasing marginal utility
   C. Diminishing product of labor
   D. Constant marginal revenue
   E. None of the above


2. How are total costs calculated?
   A. By adding marginal costs and variable costs
   B. By adding marginal revenue to total revenue
   C. By adding fixed costs to variable costs
   D. By adding average fixed costs to total fixed costs
   E. By adding average marginal cost to total variable costs


3. What is the main difference between variable costs and fixed costs?
   A. Fixed costs are steady with output and variable costs are not.
   B. Variable costs are steady with output and fixed costs are not.
   C. Variable costs rise with output and so do fixed costs.
   D. Fixed costs follow what variable costs do; variable costs do not follow fixed costs.
   E. Fixed costs are usually more expensive than variable costs.

Mini-Review Answers

1. A.Increasing, then decreasing marginal returns define a firm’s output returns.


2. C.Total costs are calculated by adding fixed costs to variable costs. When the two are added, firms can see what
   their total output costs will be.


3. A.Fixed costs are steady with output and variable costs are not. Variable costs fluctuate with different levels of
   output.

Quantity

MC

ATC

AVC

AFC

Costs

Part III: Microeconomics