1) A firm with some fixed costs and a constant marginal cost at all levels of production will have which of the following average cost relationships? As production increases, average total cost will:

a remain the same

b decrease

c increase

d decrease and then increase

e increase and then decrease

2) Average cost is $10 when quantity is 100; average cost is $9 when quantity is 101; average cost is $10 when quantity is 102. Since the average cost is the same at quantities 100 and 102, what must be true about the marginal costs?

a Marginal costs are the same at 100 and 102.

b Marginal cost is greater than average cost at 102 because average cost is increasing.

c Marginal cost is lower than average cost at 102 because average cost is increasing.

3) If the cost of labor (a variable input) decreases, at all levels of output:

a Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will decrease in the short run.

b Total costs will decrease, average total costs will decrease, average variable costs will decrease, and marginal costs will remain the same in the short run.

c Total costs will decrease, average total costs will decrease, average variable costs will remain the same, and marginal costs will remain the same in the short run.

d Total costs will decrease, average total costs will remain the same, average variable costs will remain the same, and marginal costs will remain the same in the short run. 4) A firm has a fixed rent cost of $1,000 each month. They spend $2,000 on labor and produce 100 units. If the rent goes up to $1200, how much is the change in the average variable cost?