Al’s Donuts produces about 600 dozen doughnuts daily. If flour prices increase 20 percent,
A. only marginal cost will shift up.
B. only marginal cost and average total cost will shift up.
C. marginal cost, average variable cost, and average total cost will shift up.
D. marginal cost, average total cost, average variable cost, and average fixed cost will shift up.
Answer: C
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All of the following arguments are made against inflation targeting EXCEPT
A) rigid numerical targets would diminish the flexibility of monetary policy. B) the Fed would need to depend on future forecasts of inflation since monetary policy acts with a lag. C) the Fed has little influence on inflation. D) Holding the Fed accountable for low inflation may make it difficult for elected officials to monitor whether the Fed is supporting good overall economic policy.
In the presence of asymmetric information, a piece-rate contract
A) achieves production efficiency. B) can lead to agents producing more output than would occur under a fixed-rent-paid-to-the-principal contract. C) is impossible to write. D) will result in the principal earning all of the profit.