Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

10. The Costs of Production

The Relationship Between Average Cost and Marginal Cost

Microeconomics

10. The Costs of Production

The Relationship Between Average Cost and Marginal Cost

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Multiple Choice

The government imposes a $10,000 per year inspection fee on all restaurants. Which cost curves are affected?

Average total cost and marginal cost

Average total cost and average fixed cost

Average variable cost and marginal cost

Average variable cost and average fixed cost

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Verified step by step guidance

Understand the types of costs involved: Fixed costs do not change with the level of output, while variable costs do. The inspection fee is a fixed cost because it does not vary with the number of meals served by the restaurant.

Identify which cost curves are affected by a change in fixed costs: Fixed costs affect the Average Fixed Cost (AFC) and Average Total Cost (ATC) but do not affect the Marginal Cost (MC) or Average Variable Cost (AVC).

Analyze the impact on Average Fixed Cost (AFC): Since the inspection fee is a fixed cost, it will increase the AFC. The AFC is calculated as Total Fixed Costs divided by the quantity of output.

Analyze the impact on Average Total Cost (ATC): The ATC is the sum of the Average Fixed Cost (AFC) and Average Variable Cost (AVC). Since the AFC increases due to the inspection fee, the ATC will also increase.

Conclude which cost curves are affected: The inspection fee affects the Average Total Cost (ATC) and Average Fixed Cost (AFC) curves, as these are the curves that incorporate fixed costs.