Consider a firm with fixed costs of production (F). Which FOUR of the following statements are correct regarding average cost (AC) and marginal cost (MC) of the firm, as it varies output (Q)? Select one or more: O a. If AC has a minimum point, then AC = MC at that point b. When AC > MC, the MC curve is downward-sloping. C. When AC >MC, the AC curve is downward-sloping. O d. The MC curve cannot be horizontal. e. At Q=0, average cost is equal to fixed costs. f. At Q=1, average costs and total costs are equal g. As Q becomes very large, AC becomes very small O h. As Q becomes very small, AC becomes very large

A firm has a fixed production cost of $1,000 and a constant marginal cost of production of $700 per unit produced. What is the firm's total cost function? O A. TC = 1,000 + (700q) O B. TC = 1,000 + (700q). OC. TC = 700q. O D. TC = 1,000. The firm's average total cost (ATC) of production is O A. ATC = 1,000 + (700q). OB. 1,000 + (700q) ATC = Oc. 1,000 ATC = O D. ATC = 700q. O E. ATC = 700. If the firm wanted to minimize the average total cost, would it choose to be very large or very small? Explain. OA. very small because the average total cost of production rises with output. O B.- very large because the average variable cost of production falls with output. OC. very small because the average fixed cost of production rises with output. O D. very small because the total cost of production rises with output. O E. very large because the average total cost of production falls with output.

4) Suppose that a firm's production function is Q = Lº.4K0.6. The cost of a unit of labor is $8 and the cost of a unit of capital is $12. Write firm's long run cost function. Calculate the slope of isocost line. Calculate marginal rate of technical substitution. d. Suppose firm decides to produce 50 units, what is the cost minimizing combination of these two resources (labor and capital)? a. b. C.

a) Complete the following table by filling in the fixed cost (FC), variable cost (VC), total cost (TC) and marginal cost (MC) columns.  b) For what levels of output is the marginal cost decreasing? For what levels of output is it increasing? What is the level of output at which marginal cost equals average cost?    c. Why do we assume that marginal cost first decreases then increases?