Multiple Choice
Based on the graph below, at a quantity of 100, AFC is equal to:
10. The Costs of Production
Graphing Costs
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When a firm is producing zero output, total cost equals:
A
Zero
B
Variable cost
C
Fixed cost
D
Average total cost
E
Marginal cost
Verified step by step guidance1
Understand the concept of total cost, which is the sum of fixed costs and variable costs. Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC).
Recognize that fixed costs are costs that do not change with the level of output. They are incurred even when the firm is producing zero output.
Identify that variable costs are costs that vary with the level of output. When output is zero, variable costs are also zero.
Apply the concept to the problem: When a firm is producing zero output, the total cost is equal to the fixed cost, since variable costs are zero at this level of output.
Conclude that the correct answer is 'Fixed cost' because it is the only cost incurred when output is zero, as variable costs are not present.
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