Assume short-run production. Indicate whether the statement below is true (T) or false (F). nothing: The difference between the total cost and the total variable cost is a constant. nothing: When total cost or total variable cost is increasing, there are increasing marginal returns to the variable input. nothing: Changes in fixed costs do not affect the shape or placement of the total cost curve. nothing: The marginal cost is the slope of the total cost curve or the total variable cost curve. nothing: The average cost curve is everywhere above the average variable cost curve. nothing: The marginal cost at a particular output level is the slope of a line from the origin to the corresponding point on the cost curve.

1. The difference between the total cost and the total variable cost is a constant. - TRUE

The difference between the 2 is indeed constant and is the Total Fixed cost which does not change throughout the production process.

2. When total cost or total variable cost is increasing, there are increasing marginal returns to the variable input. - FALSE

With only the total cost or total variable cost given, it is not possible to tell how the Marginal returns to the input is faring.

3. Changes in fixed costs do not affect the shape or placement of the total cost curve. - FALSE

Fixed costs are part of the total cost curve so if they change they will impart the total cost curve. An increase may not change the shape but it will definitely change the placement of the Total cost curve.

4. The marginal cost is the slope of the total cost curve or the total variable cost curve. - TRUE

The slope of either the Total cost or variable cost curves are the graphical representations of a change in either which is the definition of the Marginal cost.

5. The average cost curve is everywhere above the average variable cost curve. - TRUE

As the average cost is the sum of both the average fixed and average variable costs, it will always be higher than either so it is higher than the Average variable cost.

6. The marginal cost at a particular output level is the slope of a line from the origin to the corresponding point on the cost curve. - FALSE

Marginal cost measures the difference in cost from one unit to the next. A line from the origin to the corresponding point would have measured for all units produced making it the Average cost not Marginal Cost.

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