Question

In the short run, which of the following statements is correct?
A. The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points.
B. Average variable cost declines continuously as total output is expanded.
C. Total cost will exceed total variable cost.
D. If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts.

Answer 1

Answer:

C. Total cost will exceed total variable cost

Explanation:

In production, cost refers the the expenses used in the production process. Total cost refers to the overall cost of production and it's divided into 2 in the short run which are : Fixed cost and variable cost. Implying that

Total cost = Fixed Cost + Variable cost. Because of the presence of fixed cost in total cost, Total cost is always greater or exceeds total variable cost in the short run.

Note that, as the name implies, fixed costs are cost of fixed inputs/resources used in the production process while variable cost are cost of variable inputs/resources,( that is resources that changes) used in the production process.