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Economics · May / June 2018 · Paper 11 · Question 14

2281Firms’ costs, revenue and objectives

A firm that sells its product for $6 a unit has the following total costs. | output (units) | 0 | 10 | 20 | 30 | |---|---|---|---|---| | total costs ($) | 40 | 100 | 120 | 150 | Which statement is correct?

  1. AAverage cost is lowest when 10 units are produced.
  2. BThe firm does not make any profit when 20 units are sold.
  3. CThe firm has no fixed costs.
  4. DTotal variable costs fall continuously over these outputs.

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Correct answer: B. The firm does not make any profit when 20 units are sold.

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