Question

f the firm wanted to minimize the average total​ cost, would it choose to be very large or very​ small? Explain. A. very large because the marginalmarginal cost of production falls with output. B. very small because the marginalmarginal cost of production rises with output. C. very small because the average total cost of production rises with output. D. very large because the average total cost of production falls with output. E. very small because the total cost of production rises with output.

Answer 1

Answer:

D. very large because the average total cost of production falls with output.        

Explanation:

             The total cost of production of a firm is the total cost of the labor that it employs and also the physical capital that the firm uses for the output. The total cost of production can be divided into two categories. They are :

--fixed cost

--variable cost

           Fixed cost of a firm do not change whether the output is less or more, while the variable cost depends upon the production output. The variable cost for a company is large if the production is more.

           A company's average total​ cost is the company's total cost divided by the company's production output.

           Therefore the production output has to be very large in order to minimize or decreases the average total cost of the company's production.

Hence the answer is ---

D. very large because the average total cost of production falls with output.