Question

Use the following two statements to answer this question:I. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output.II. The marginal cost of a given level of output is the slope of the line that is tangent to the total cost curve at that level of output.A. I is true, and II is false.B. Both I and II are true.C. I is false, and II is true.D. Both I and II are false.

Answer 1

Answer:

B. Both I and II are true.

Explanation:

The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output

The average total cost is defined as the sum of all total costs divided by the quantity produced. In other words, the cost of one unit of production. The average cost curve as shown in the diagram is U-shaped, where it falls with economies of scale and later rises as diseconomies of scale sets in.

The marginal cost of a given level of output is the slope of the line that is tangent to the total cost curve at that level of output

Marginal cost is the change that occurs in the total cost when quantity produced increases by one unit. In other words, it is the cost of producing an additional unit of a good. As per the diagram, the slope of the line tangent to the TC (TC = AC x Q1) curve at Q1 is the firm's marginal cost at this output level.