QuestionJuly 21, 2025

If a profit-maximizing firm's fixed cost of producing widgets falls, its total cost curve is unaffected. its marginal cost curve shifts down. the firm will produce more widgets. the firm's average profit per widget produced rises.

If a profit-maximizing firm's fixed cost of producing widgets falls, its total cost curve is unaffected. its marginal cost curve shifts down. the firm will produce more widgets. the firm's average profit per widget produced rises.
If a profit-maximizing firm's fixed cost of producing widgets falls,
its total cost curve is unaffected.
its marginal cost curve shifts down.
the firm will produce more widgets.
the firm's average profit per widget produced rises.

Solution
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Answer

The firm's average profit per widget produced rises. Explanation 1. Analyze the effect of fixed cost on total cost curve Fixed costs do not affect the shape or position of the total cost curve since they are constant and do not vary with output. 2. Analyze the effect of fixed cost on marginal cost curve Marginal cost is derived from variable costs, not fixed costs. Therefore, a change in fixed costs does not shift the marginal cost curve. 3. Determine the impact on production quantity Since marginal cost remains unchanged, the profit-maximizing output level, determined by equating marginal cost to marginal revenue, remains the same. 4. Evaluate average profit per widget With lower fixed costs, total costs decrease for any given level of output, increasing the firm's profit. Thus, average profit per widget rises.

Explanation

1. Analyze the effect of fixed cost on total cost curve<br /> Fixed costs do not affect the shape or position of the total cost curve since they are constant and do not vary with output.<br /><br />2. Analyze the effect of fixed cost on marginal cost curve<br /> Marginal cost is derived from variable costs, not fixed costs. Therefore, a change in fixed costs does not shift the marginal cost curve.<br /><br />3. Determine the impact on production quantity<br /> Since marginal cost remains unchanged, the profit-maximizing output level, determined by equating marginal cost to marginal revenue, remains the same.<br /><br />4. Evaluate average profit per widget<br /> With lower fixed costs, total costs decrease for any given level of output, increasing the firm's profit. Thus, average profit per widget rises.
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